MOmentum investing involves following the recent trend of a stock, which can be both ways. In the “long” context, investors “will essentially buy at a high price, but hope to sell even more”. And for investors who follow this methodology, it is essential to take advantage of trends in a stock’s price; once a stock sets a course, it is more than likely to continue moving in that direction. The goal is that once a stock takes a fixed path, it will lead to timely and profitable trades.
Even though momentum is a popular feature of the stock, it can be difficult to define. The debate over which best and worst measures to focus on is a long one, but the Zacks Momentum Style Score, which is part of the Zacks style sheet music, helps us to solve this problem.
Below we take a look at Alphabet Inc. (GOOG), which currently has a Momentum Style Score of B. We also discuss some of the major drivers of the Momentum Style Score, like price variation and earnings estimate revisions.
It’s also important to note that Style Scores work in addition to the Zacks Ranking, our stock rating system which has an impressive track record of outperforming. Alphabet Inc. currently has a Zacks rank of # 2 (Buy). Our research shows that stocks ranked Zacks Rank # 1 (Strong Buy) and # 2 (Buy) and style scores of A or B outperform the market within the next month.
You can see the current list of Zacks # 1 Rank Stocks here >>>
Ready to beat the market?
In order to see if GOOG is a promising start-up pick, let’s take a look at some elements of the Momentum style to see if this company holds up.
A good benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and whether buyers or sellers currently have the upper hand. It is also useful to compare a stock to its industry, as this can help investors identify the best companies in a particular field.
For GOOG, shares rose 5.02% over the past week, while Zacks’ internet services sector rose 0.34% over the same period. Stocks look pretty good from a longer time frame, as the 9.95% monthly price change also compares favorably with the industry’s 4.38% performance.
Considering longer-term price metrics, such as performance over the past three months or the year, can also be beneficial. In the last quarter, shares of Alphabet Inc. rose 25.97% and 87.51% last year. In contrast, the S&P 500 moved only 9.79% and 66.07%, respectively.
Investors should also pay attention to GOOG’s 20-day average trading volume. Volume is useful in many ways, and the 20-day average sets a good price / volume benchmark; a rising stock with above average volume is usually a bullish sign, while a falling stock with above average volume is usually bearish. GOOG currently has an average of 1,433,777 shares over the past 20 days.
The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends also remain at the heart of Zacks Rank. A good path here can help show some promise, and we’ve recently seen that with GOOG.
Over the past two months, 3 revenue estimates have increased from none lower for the full year. These revisions helped raise the GOOG consensus estimate from $ 68.86 to $ 69.28 in the past 60 days. For the next fiscal year, 3 estimates have increased while there have been no downward revisions during the same period.
At the end of the line
Considering these factors, it shouldn’t come as a surprise that GOOG is a # 2 (Buy) stock and has a Momentum Score of B. If you’re looking for a new pick that should skyrocket in the near term, be sure to check out keep Alphabet Inc. on your shortlist.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.