Zacks.com Featured Highlights Include: FTI Consulting, Scotts Miracle-Gro And PennyMac Financial Services
Zacks Investment Research | Oct 29, 2019 10:55PM ET
For Immediate Release
Chicago, IL – October 30, 2019 - Stocks in this week’s article are FTI Consulting, Inc. (NYSE:FCN) , The Scotts Miracle-Gro Company (NYSE:SMG) and PennyMac Financial Services, Inc. (NYSE:PFSI)
3 Stocks with Momentum Anomaly to Enhance Portfolio Returns
When value or growth investing fails to fetch sustained profits, investors should explore another time-tested winning strategy that simply bets on the frontrunner stocks. This is known as momentum investing.
For long-term investors, reacting emotionally to volatile trends can be more damaging to a portfolio’s performance than the downturn itself. By adhering to a well-thought-out investment plan, investors may be better off during periods of short-term uncertainty. At the core, momentum investing is buying high, selling higher. It is based on the idea that once a stock establishes a trend, it is likely to continue in that direction.
There’s a whole list of behavioral biases that most investors exhibit. For instance, there are investors who are anxious about booking losses and hence, hold on to losing stocks for too long, hopeful of a rebound in prices. On the other hand, a few investors sell their winners way too early. Momentum investing is one of the best strategies to avoid making such mistakes.
Momentum strategy works because investors initially tend to underreact to news, events or data releases. However, once things become clear, they tend to go with the flow and overreact, causing dramatic price reactions.
So, basically, it’s a way to profit from the general human tendency to extrapolate current trends into the future. Momentum investing is, thus, based on that gap in time which exists before the mean reversion occurs i.e. before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period of time and across market stages. So obviously, this strategy is quite tricky to be implemented as detecting these trends well ahead of time is no child’s play.
Here, we have created a strategy that will help investors get in on these fast movers when there is a short-term pullback in price, and rake in handsome gains.
For the rest of this Screen of the Week article please visit Zacks.com at:Zacks Investment Research
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