Zacks.com Featured Highlights Include: Cogent Communications, Atlantic Capital Bancshares, CBIZ And America's Car-Mart
Zacks Investment Research | Mar 03, 2020 07:22AM ET
For Immediate Release
Chicago, IL – March 3, 2020 – Stocks in this week’s article are Cogent Communications Holdings, Inc. (NASDAQ:CCOI) , Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) , CBIZ, Inc. (NYSE:CBZ) and America's Car-Mart, Inc. (NASDAQ:CRMT) .
Explore These 4 Momentum Stocks Using Driehaus Strategy
Investors who have the propensity to take higher risk can think of investing in momentum stocks to boost their gains. In this respect, the Driehaus strategy can be used to choose the best momentum stocks using the “buy high and sell higher" theory. Eventually, Richard Herman Driehaus earned his place in Barron’s All-Century Team following the success of this investment strategy.
The American Association of Individual Investors (AAII) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five- and 10-year time frames, respectively, compared with -1.1% and 4.2% gains registered by the S&P 500. Thus, investors with a high-risk appetite may opt for this strategy to boost their portfolio returns.
A Detailed Look Into Driehaus Strategy
Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in a decline and try to guess when it will turn around.” In line with this insight, AAII took into account the percentage 50-day moving average as one of the key criteria before creating a portfolio following Driehaus’ philosophy.
It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend.
Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also given importance in this strategy, which was made to provide better returns over the long term.
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