Even though the economic activities in the United States are returning now to pre-pandemic levels thanks to a rapid vaccination drive, the government’s measures to reduce vaccine hesitancy, and supportive policies, the stock market remains volatile. This can be attributed primarily to investors’ concerns over rising inflation.
Amid this environment, turning to momentum investing could be rewarding because stocks that have managed to gain momentum over the past few months might be able to maintain it in the near- to mid-term irrespective of volatility witnessed by the broader market. Investors’ increasing interest in momentum stocks is evident in the iShares MSCI USA Momentum Factor ETF’s (MTUM) 11.6% returns over the past three months.
Canadian Natural Resources Limited (CNQ), SS&C Technologies Holdings, Inc. (SSNC), Mitsubishi Chemical Holdings Corporation (MTLHY), and The Timken Company (TKR) have been generating solid momentum over the past few months and we think should keep rallying in the coming months, dodging the market volatility. So, it could be wise to scoop up these stocks now.
Canadian Natural Resources Limited (CNQ)
CNQ acquires, explores, produces, and sells crude oil, natural gas, and natural gas liquids (NGLs). The company offers synthetic crude oil (SCO), bitumen (thermal oil), primary heavy crude oil, and Pelican Lake heavy crude oil. Its midstream assets include two crude oil pipeline systems, and a 50% working interest in an 84-megawatt cogeneration plant at Primrose.
Company President Tim McKay said, “As the global vaccine distribution increases and crude oil demand recovers, especially in the United States, we are seeing improved commodity pricing, and when combined with our top tier execution and disciplined capital program we are well positioned to generate significant free cash flow in 2021.”
CNQ’s net earnings surged 83.8% sequentially to $1.38 billion in the first quarter, ended March 31, 2021. Its adjusted net earnings from operations grew 592.6% sequentially to $1.22 billion. Its adjusted funds flow came in at $2.71 billion, which represents a 102.8% year-over-year increase. The company’s EPS came in at $1.16, compared to a $1.08 loss per share in the prior-year period.
Analysts expect CNQ’s EPS to increase 1,031% year-over-year to $0.95 for the quarter ending September 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $5.03 billion for the current quarter ending June 30, 2021, which represents a 133.3% year-over-year rise. The stock has surged 90.6% over the past nine months to close Friday’s trading session at $37.60. It has gained 56.3% so far this year.
It’s no surprise that CNQ has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, Sentiment and Momentum, and a B grade for Quality. Click here to see CNQ’s rating for Value and Stability as well. CNQ is ranked #3 of 51 stocks in the B-rated Foreign Oil & Gas industry.
SS&C Technologies Holdings, Inc. (SSNC)
SSNC provides software products and services mainly to the financial and healthcare industries. The company’s software-enabled services include SS&C GlobeOp, SS&C Retirement Solutions and Bluedoor. Its software products include portfolio management software, trading software, and banking and lending solutions.
On May 14, SSNC announced that it had amended the Scheme Implementation Deed with Mainstream Group Holdings Limited and had proposed to acquire the company subject to customary conditions. Mainstream is a provider of investment administration and fund accounting, among other services to leading fund managers and superannuation funds, family offices and dealer groups. So, the acquisition might prove profitable for SSNC.
The company’s revenue increased 5.1% year-over-year to $1.23 billion for the first quarter, ended March 31, 2021. Its operating income grew 23% year-over-year to $269.10 million, while its net income increased 76.3% year-over-year to $174.90 million. The company’s EPS increased 75.7% year-over-year to $0.65.
For the current quarter, ending June 30, 2021, analysts expect SSNC’s EPS to increase 9.6% year-over-year to $1.14. It surpassed consensus EPS estimates in each of the trailing four quarters. For the quarter ending September 30, 2021, its revenue is expected to be $1.21 billion, which represents a 7.1% year-over-year rise. The stock has surged 14.5% over the past three months to close Friday’s trading session at $73.23. Over the past nine months, the stock soared 19.6%.
SSNC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Momentum and a B grade for Stability, Growth, Quality, Sentiment and Value.
Mitsubishi Chemical Holdings Corporation (MTLHY)
Headquartered in Tokyo, Japan, MTLHY provides performance products, chemicals, industrial gases and health care products internationally. The company’s performance products include specialty chemicals, functional food materials, inorganic materials and carbon fiber. Its health care products consist of pharmaceuticals, drug discovery solutions, medical support and clinical examination services.
In January, MTLHY announced the establishment of its Image Analysis Center of Excellence (CoE) within the Digital Transformation (DX) Group of the Emerging Technology & Business Development Office (ETBDO) to further expand the use of image analysis. This move could help accelerate the company’s growth in the coming months.
MTLHY’s total assets increased 3% year-over-year to 5,287.23 billion yen ($48.24 billion) in the fiscal year ended March 31, 2021. Its cash flow increased 3.3% year-over-year to 467.13 billion yen ($4.26 billion). MTLHY’s financial income was 8.25 billion yen ($75.3 million), which represents a 14.5% year-over-year increase. Its comprehensive income increased 33,700.2% year-over-year to 160.55 billion yen ($1.46 billion).
The company surpassed consensus EPS estimates in three of the trailing four quarters. MTLHY’s revenue is expected to increase 15.7% year-over-year to $7.91 billion for the current quarter, ending June 30, 2021. The stock has soared 27.1% over the past six months and gained nearly 37% over the past nine months.
MTLHY’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system.
The stock has an A grade for Stability and Momentum, and a B grade for Growth, Value and Quality. Within the A-rated Chemicals industry, MTLHY is ranked #6 of 99 stocks.
To see the additional POWR Rating for MTLHY (Sentiment), click here.
The Timken Company (TKR)
TKR designs, manufactures, and manages engineered bearings and power transmission products and services worldwide. It operates through two segments: mobile industries and process industries. The company offers its products under various brands, including Timken, Rollon, Lovejoy, BEKA, and Groeneveld.
On February 16, 2021, Huntington Ingalls Industries–Newport News Shipbuilding (HII-NNS)–awarded a contract to TKR to supply the main reduction gears (MRGs) for the future USS Doris Miller (CVN-81) aircraft carrier. This is expected to drive up the company’s sales.
TKR’s net sales surged 11% year-over-year to $1.02 billion in fiscal first quarter (ended March 31, 2021). Its operating income grew 23.8% year-over-year to $150.7 million. Its net income came in at $116 million, which represents a 38.1% year-over-year increase. The company’s EPS came in at $1.47, up 38.7% year-over-year.
For the current quarter, ending June 30, 2021, analysts expect TKR’s EPS and revenue to increase 42.2% and 30.5%, respectively, year-over-year to $1.45 and $1.05 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock gained 19% over the past six months to close Friday’s trading session at $88.82. Over the past nine months, the stock surged 60.9%.
TKR’s POWR Ratings reflect its solid prospects. The company has an overall A rating which translates to Strong Buy in our proprietary ratings system. It has an A grade for Momentum and Sentiment, and a B grade for Value and Quality.
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CNQ shares were trading at $37.37 per share on Monday morning, down $0.23 (-0.61%). Year-to-date, CNQ has gained 55.38%, versus a 13.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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