6 Top Momentum Stocks In November With More Room To Run

Wall Street bulls, which dominated in the first three quarters of this year, continued their forward march in the first two months of the final quarter. Wall Street is on the verge of finishing November with an impressive rally.

Month to date, all three major stock indexes — the Dow, the S&P 500 and Nasdaq Composite — advanced 4.1%, 3.8% and 5%, respectively. All three indexes are currently at their all-time highs, having hit the zenith several times in November alone. Apart from these, small-cap centric Russell 2000 hit 52-week high this week, showing signs of breakout.

Three Major Drivers of November

First, on Nov 12, President Donald Trump said a U.S.-China trade deal “could happen soon,” and added that a phase one agreement is “close.” On Nov 23, U.S. national security adviser Robert O’Brien said that an initial trade agreement with China is still possible by the end of the year.

On Nov 26, Chinese vice premier Liu He, the country’s top negotiator on trade, had a telephonic conversation with the U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin regarding further discussions. All these developments raised the hope for an interim trade deal.

Second, third-quarter earnings results were not as disappointing as estimated at the starting of the reporting cycle. Moreover, overall guidance is not as weak till now as was feared. As of Nov 20, 469 S&P 500 members reported third-quarter results. Total earnings for these index members are down 1.2% year over year while revenues increased 4.3%. Notably, 72.7% companies surpassed earnings estimates while 57.6% beat on revenues.

Third, strong economic data strengthened investors’ faith in the U.S. economy. Third-quarter GDP estimate was revised upward from 1.9% to 2.1%. U.S. consumer spending rose 0.3% in October, marking the eighth consecutive month of growth. It is a good sign for the upcoming holiday shopping season. Moreover, decline in business investment in the third quarter revised to 2.7% from 3% reported earlier.

Future Catalysts

According to Conference Board report, the Expectations Index of November, which is a measure of consumers’ short-term (for the next six months) outlook for income, business and labor market conditions, increased to 97.9 from 94.5 in October. Notably, the University of Michigan report also revealed that the Expectations Index rose to 87.3 in November from 84.2 in October. Confidence levels remained high to support strong spending during the holiday season.

Moreover, similar findings of the two different studies clearly indicate that U.S. consumers are expecting a rebound of economic growth in the first quarter of 2020. On Nov 27, the CNBC/Moody’s Analytic’s rapid update of economists’ forecasts for fourth-quarter 2019 increased 0.1 % to 1.8%. Atlanta Fed’s fourth-quarter GDP forecast jumped to 1.7% from a mere 0.4% eight days ago. J.P. Morgan also raised GDP forecast to 2.1% from 1.25%.

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Additionally, even a temporary trade truce between the United States and China will bolster business confidence and stabilize overall U.S. economic growth. On Nov 24, China’s government released a document supporting more protection of intellectual property rights. Notably, protection of U.S. intellectual properties, especially for high-tech products and termination of forced technology transfer by China’s government were the primary issues of the U.S.-China trade conflict.

Our Top Picks

At this stage, we have narrowed down our search to six stocks, which popped in November and still have strong momentum. Each of our picks carries a Zacks Rank #1 (Strong Buy) and a Zacks Investment Research

Written By: Zacks Investment Research