Unlocking Momentum Investing: How to Thrive by Buying High and Selling Higher
Understanding Momentum Investing
Momentum investing contradicts the traditional investment wisdom of “buy low, sell high.” Instead, it operates on the principle of “buying high and selling higher.” This strategy focuses on investing in stocks that are currently performing well, with the belief that they will continue to perform well in the near term. The challenge for investors is identifying the right time to enter these fast-moving stocks, as they can quickly lose momentum when their valuation no longer reflects their growth potential.
The Role of Zacks Momentum Style Score
Identifying stocks with genuine momentum is crucial for investors who wish to adopt this strategy. The Zacks Momentum Style Score, part of the Zacks Style Scores system, plays a significant role in this process. It helps investors by focusing on trends in a stock’s price or earnings. The ‘Fast-Paced Momentum at a Bargain’ screen, for example, is designed to find fast-moving stocks that are still reasonably priced. Lands’ End (LE) is highlighted as a prime candidate that has emerged from this screening process.
Why Lands’ End Stands Out
Lands’ End (LE) exhibits several characteristics that make it an attractive choice for momentum investors. Firstly, the company has shown impressive price momentum with a four-week price change of 11.9% and a twelve-week gain of 19.9%. Additionally, its beta of 2.97 indicates that the stock is significantly more volatile than the market, which can be advantageous for momentum strategies. The combination of these factors has earned LE a Momentum Score of A from Zacks, suggesting it is an opportune time to invest in the stock.
Valuation and Future Prospects
Despite its strong momentum features, Lands’ End is trading at a compelling valuation. With a Price-to-Sales ratio of 0.23, the stock is considered quite affordable. This suggests that LE not only offers the potential for rapid growth but also represents a value buy, providing an attractive proposition for investors looking for momentum at a reasonable price.
In addition to Lands’ End, there are numerous other stocks that meet the criteria set by the ‘Fast-Paced Momentum at a Bargain’ screen. Investors may want to consider these options as well in their search for the next big stock. Moreover, Zacks Investment Research offers over 45 premium screens designed to help investors find stocks that can beat the market, tailored to various investing styles.
The success of any stock-picking strategy lies in its proven track record. Tools like the Zacks Research Wizard allow investors to backtest the effectiveness of their strategies, ensuring they are making informed decisions based on historical performance.
As the market evolves, so do the opportunities for momentum investing. Will Lands’ End continue its upward trajectory, and what new stocks will emerge to meet the criteria of momentum at a bargain? Only time will tell, but for now, momentum investing offers an intriguing pathway for those looking to capitalize on the market’s current winners.