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How to Profit From This Momentum Shift
From Baltimore – If you watch the equity markets every day as I do, you will begin to see how sectors and industries ebb and flow as the economy changes and the business cycle unfolds.
One of my favorite ways to look at the broad market is through a website called Finviz, which is short for financial visualizations.
On the Finviz homepage, just click on the S&P 500 Index heat map and you’ll see all the different sectors and companies in the index. The size of the box represents the company’s market cap – which is why Apple (Nasdaq: AAPL), the world’s largest company, has the most real estate on the screen.
The color of the box represents what the company’s share price is doing over the selected time period (in the chart above, it’s three months). It ranges from bright green, which signals the most positive change, to bright red, the most negative.
Week by week, month by month and year by year, the sizes and colors of these boxes change. What you’re watching – in real time – is how momentum slowly (and, occasionally, rapidly) shifts from sector to sector and company to company.
That’s exactly the topic of today’s Market Wake-Up Call, in which host and Senior Editor Rachel Gearhart interviews Oxford Club Chief Investment Strategist Alexander Green about his momentum investing strategy.
“A momentum stock is any company that’s in a pronounced uptrend because it’s leading the market in sales, earnings growth [and] price action,” Alex explains. “As the economic landscape changes from quarter to quarter and year to year, the momentum will shift to different sectors, different industries [and] different companies.”
All that information is straightforward. It and $3 will get you a Starbucks latte (sorry, not a grande, just a tall).
The trick, of course, is identifying momentum stocks in time to profit from them. That’s exactly what Alex does in his VIP Trading Research Service The Momentum Alert.
To detect strong momentum, Alex applies a rigorous screening process for the fundamentals that have historically driven strong price action. These include…
- Exceptional top-line growth
- A recent and sustainable record of rapid annual earnings growth
- A high return on equity, which shows an efficient use of capital by management
- Profit margins that can be protected from the competition.
(Alex goes into more detail on all of these in today’s video.)
This screening method has worked extremely well for Alex and his subscribers since his service was launched in 2001. The Momentum Alert has returned 591.56% since its inception. The broad market – as measured by the S&P 500 – has returned 237.76%.
Our Research Team selected two particularly spectacular (and recent) picks from The Momentum Alert as examples.
From October 2020 to February 2021, Digital Turbine (Nasdaq: APPS) returned 153.6%. Calix (NYSE: CALX) brought subscribers a gain of 50.98% in a little more than three months – from December 2020 to March 2021.
Will those same stocks be the winners of the future? Maybe, maybe not.
Nothing is static in markets (just play around with the Finviz website and you’ll see that pretty clearly).
And right now, momentum is shifting away from COVID-19 winners, like Amazon (Nasdaq: AMZN) and Netflix (Nasdaq: NFLX), and toward stocks of companies that will benefit from the economic reawakening we’re beginning to experience. The new momentum sectors include metals, energy, physical retailing and banks, among others, Alex tells Rachel.
If you’re interested in catching ahold of the momentum stocks Alex identifies as this economic expansion proceeds, you’ll want to sign up for his upcoming summit featuring bestselling author Bill O’Reilly – How to Legally Rig the Stock Market in Your Favor.
The summit goes live on June 3 at 1 p.m. ET. This is something you’re not going to want to miss. Just click here to register for your spot completely free of charge.
We’ll see you there.
Enjoy your Sunday,
Matt