Momentum investing is all about the idea of following a stock’s recent trend, which can be in either direction. In the ‘long’ context, investors will essentially be “buying high, but hoping to sell even higher.” And for investors following this methodology, taking advantage of trends in a stock’s price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Wesco International (WCC), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.
It’s also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Wesco International currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Set to Beat the Market?
In order to see if WCC is a promising momentum pick, let’s examine some Momentum Style elements to see if this maker of electrical and industrial maintenance supplies and construction materials holds up.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For WCC, shares are up 13.4% over the past week while the Zacks Electronics – Parts Distribution industry is up 0.91% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 24% compares favorably with the industry’s 5.55% performance as well.
While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Shares of Wesco International have increased 32.01% over the past quarter, and have gained 37.77% in the last year. In comparison, the S&P 500 has only moved 3.78% and -5.37%, respectively.
Investors should also pay attention to WCC’s average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. WCC is currently averaging 544,426 shares for the last 20 days.
The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock’s price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with WCC.
Over the past two months, 5 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost WCC’s consensus estimate, increasing from $16.66 to $17.08 in the past 60 days. Looking at the next fiscal year, 2 estimates have moved upwards while there have been no downward revisions in the same time period.
Given these factors, it shouldn’t be surprising that WCC is a #1 (Strong Buy) stock and boasts a Momentum Score of A. If you’re looking for a fresh pick that’s set to soar in the near-term, make sure to keep Wesco International on your short list.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report