While investor optimism surrounding the rebounding U.S. economy and a fast-paced vaccination program is driving the stock markets, the Biden administration’s $3.5 trillion proposal to tax the rich and soaring COVID-19 cases in many countries worldwide are fostering volatility in the stock market.
In this environment, momentum investing could help investors dodge short-term market volatility because stocks that generated momentum usually maintain it for some time irrespective of market conditions. Investors’ interest in momentum stocks is evidenced by iShares MSCI USA Momentum Factor ETF’s (MTUM) 9.3% returns over the past month versus SPDR Portfolio S&P 500 Growth ETF’s (SPYG) and SPDR Portfolio S&P 500 Value ETF’s (SPYV) 8.1% and 3.3% gains, respectively, over the same period.
Hubbell Incorporated (HUBB), AutoNation, Inc. (AN), and DICK’s Sporting Goods, Inc. (DKS) have witnessed decent momentum over the past few months and should keep rallying. So, we think it could be wise to scoop up these stocks now.
Hubbell Incorporated (HUBB)
HUBB, with its subsidiaries, designs, manufactures, and sells electrical and electronic products internationally. The company operates through two segments—its Electrical Solution segment, which offers standard and special application wiring device products, rough-in electrical products, connector and grounding products, lighting fixtures and controls, and other electrical equipment, and its Utility Solution segment, which designs, manufactures, and sells distribution, transmission, substation, and telecommunications products.
The company’s net sales increased 3.9% sequentially to $1.08 billion for the first quarter, ended March 31, 2021. Its net income grew 3.6% year-over-year to $77.70 million. Also, its adjusted EPS increased 4.9% year-over-year to $1.72.
For the quarter ending June 30,analysts expect HUBB’s EPS and revenue to increase 15.5% and 13.1%, respectively, year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 54.3% over the past year and closed Friday’s trading session at $192.01, which is quite close to its $196.47 52-week high. It has also gained 23.4% over the past three months.
HUBB’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary 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 Stability and Quality. Within the B-rated Industrial – Equipment industry, HUBB is ranked #25 of 89 stocks.
To see the additional POWR Ratings for HUBB (Growth, Value, and Sentiment), click here.
AutoNation, Inc. (AN)
AN, through its subsidiaries, operates as an automotive retailer in the United States. The company operates through three segments—Domestic, Import, and Premium Luxury. It offers a range of automotive products and services, including new and used vehicles, and parts and services such as automotive repair and maintenance, and wholesale parts and collision services.
On February 4, AN announced its enhanced AutoNation Express experience–its integrated retailing solution that provides customers with a seamless and intuitive omni channel vehicle shopping and purchase experience. It has been able to create a highly personalized digital experience online and in-store, which should increase its customer base.
AN’s revenue increased 27% year-over-year to $5.90 billion for the quarter ended March 31. Its adjusted operating income increased 104% year-over-year to $336.9 million and its adjusted net income grew 184% year-over-year to $233.8 million. The company’s adjusted EPS increased 207% year-over-year to $2.79.
Analysts expect AN’s EPS and revenue to increase 79.2% and 27.7%, respectively, year-over-year, for the quarter ending June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock surged 175.2% over the past year and closed Friday’s trading session at $102.48. It has also gained 43.8% over the past three months.
It’s no surprise that AN has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Momentum and Value, and a B grade for Sentiment and Quality.
DICK’S Sporting Goods, Inc. (DKS)
DKS operates as a sporting goods retailer primarily in the Eastern United States. It provides sporting goods equipment, fitness equipment, golf equipment, and hunting and fishing gear products, apparel, and footwear and accessories. The company also owns and operates Golf Galaxy, Field & Stream, and other specialty concept stores.
On April 29, 2021, DKS announced a partnership with Stephen ‘tWitch’ and Allison Boss for its family athleisure brand, DSG. The company also announced on April 22 that its VRST men’s apparel line signed two-time national champion, Heisman Trophy winner and top professional football prospect DeVonta Smith as a brand partner. This is expected to have a positive impact on its brand image and could increase its sales as well.
The company’s net sales increased 19.8% year-over-year to $3.13 billion for the quarter ended January 30, 2021. DKS’ consolidated net income grew 214.6% year-over-year to $219.6 million. Also, the company’s EPS increased 172.8% year-over-year to $2.21.
For the quarter ended April 30, 2021, analysts expect DKS’ EPS and revenue to increase 158.5% and 47.2%, respectively, year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained nearly 181% over the past year and closed Friday’s trading session at $82.58. It is currently trading 4.6% below its $86.60 52-week high. It has also gained 23.2% over the past three months.
DKS’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. It has an A grade for Momentum, and a B grade for Growth and Quality.
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HUBB shares were trading at $194.83 per share on Monday afternoon, up $2.82 (+1.47%). Year-to-date, HUBB has gained 24.95%, versus a 12.44% 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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