The resurgence of COVID-19 cases in several parts of the world due to the rapid spread of the highly transmissible COVID-19 Delta variant has been contributing to severe stock market volatility. While the stock market remained steady despite 6.5% U.S. GDP growth for the second quarter coming in weaker than the forecast of 8.4% growth, the chances of a market correction in the near term cannot be ruled out.
Amid these conditions, 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 the same in the near to mid-term irrespective of the movement of the broader market.
Eaton Corporation plc (ETN), Mitsubishi Chemical Holdings Corporation (MTLHY), and Vertiv Holdings Co (VRT) have been maintaining solid momentum over the past few months and should continue rallying in the coming months, dodging the market volatility. In addition, each of these names has an A grade for Momentum, along with an overall Strong Buy or Buy rating, in our POWR Ratings system. So, we think it could be wise to scoop up these stocks now.
Eaton Corporation plc (ETN)
Based in Dublin, Ireland, ETN is a power management company. With a presence in more than 175 countries, the company’s operating segments include an Electrical Americas and Electrical Global segment; a Hydraulics segment; and an eMobility segment.
ETN announced the global launch of the 9PX lithium-ion uninterruptible power supply on July 15, 2021. Sami Hussaini, the company’s product manager, UPS 9 series, said, “The need for reliable backup power has never been more critical. Our 9PX lithium-ion UPS continues our commitment to building lithium-ion capabilities into UPS solutions, enabling greater business continuity and always-on power in environments with limited on-site IT support.”
ETN’s total assets surged 7.1% year-over-year to $34.08 billion in its fiscal first quarter ended March 31, 2021. Its global electrical segment sales grew 9.5% year-over-year to $1.25 billion, and its adjusted earnings came in at $577 million, representing a 12.2% year-over-year increase. The company’s adjusted EPS was $1.44, up 15.2% year-over-year.
Analysts expect ETN’s EPS and revenue to increase 46.7% and 6.8%, respectively, year-over-year to $6.22 and $19.08 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock gained 34% over the past six months and 51.3% over the past nine months to close yesterday’s trading session at $157.71, after hitting its 52-week high of $158.11.
It’s no surprise that ETN 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 Momentum, and a B grade for Growth, Quality, and Sentiment. Click here to see ETN’s rating for Value and Stability. ETN is ranked #20 of 84 stocks in the A-rated Industrial – Machinery industry.
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.
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). This move is expected to further expand the company’s market reach in the image analysis space.
MTLHY’s total assets increased 3% year-over-year to 5,287.23 billion yen ($48.24 billion) in its fiscal year ended March 31, 2021. Its cash flow increased 3.3% year-over-year to 467.13 billion yen ($4.26 billion), while its financial income came in at 8.25 billion yen ($75.3 million), representing 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’s revenue is expected to increase 9.3% year-over-year to $8.18 billion for the quarter ending September 30, 2021. Over the past six months, the stock’s price has soared 22.7% and generated 38.7% returns over the past nine months to close yesterday’s trading session at $41.04. However, it is currently trading 4.4% below its 52-week high of $42.95, which it hit on June 22, 2021.
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 Momentum, and a B grade for Growth, Value, Stability, and Quality. Within the A-rated Chemicals industry, MTLHY is ranked #2 of 99 stocks.
To see more of MTLHY’s component grade, click here.
Vertiv Holdings Co (VRT)
VRT designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments. It offers power management products, uninterruptible power systems, thermal management products, and integrated rack systems.
On April 22, 2021, VRT announced a new factory in Rugvica, Croatia, to support its integrated modular solutions business in EMEA. Giordano Albertazzi, VRT’s president in EMEA, said, “We are seeing strong growth in the adoption of prefabricated modular solutions to support new technologies, and as market leaders we are investing both in capacity and innovation to continue to meet our customers’ needs and stay ahead of the curve.”
VRT’s net sales surged 25.3% year-over-year to $1.26 billion in its fiscal second quarter ended June 30, 2021. Its adjusted operating profit grew 30.1% year-over-year to $134 million. Its total assets came in at $5.33 billion, which represents a 5.1% year-over-year increase, and the company’s EPS came in at $0.31, up 93.7% year-over-year.
For its fiscal year 2021, analysts expect VRT’s EPS and revenue to increase 43.6% and 12.5%, respectively, year-over-year to $1.12 and $4.92 billion. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 39.8% over the past six months and 21% over the past three months to close yesterday’s trading session at $28.13, after hitting its 52-week high of $28.45.
VRT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. In addition, it has an A grade for Momentum, and a B grade for Growth and Sentiment.
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ETN shares were trading at $157.65 per share on Friday morning, down $0.06 (-0.04%). Year-to-date, ETN has gained 32.64%, versus a 18.01% 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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