Understanding Momentum Investing with Style Scores

For those aiming to navigate the stock market landscape, identifying the right stocks that align with your investment strategy is paramount. Understanding different investment styles and using tools to discover high-potential stocks can significantly bolster your investment decisions. Among such supportive tools are the Zacks Style Scores—an integral part of the Zacks Premium research service designed to aid investors in pinpointing stocks that are likely to outperform the market.

What are Zacks Style Scores?

Zacks Style Scores are a set of indicators that rate stocks based on Value, Growth, and Momentum. These scores are intended to complement the Zacks Rank—a proprietary model that predicts future stock performance based on earnings estimate revisions. Stocks are scored from A to F, with A being the highest, indicating a higher likelihood of outperforming the market.

The Four Style Score Categories

The scores categorize stocks into four segments:

• Value Score: For investors seeking to find stocks traded at appealing prices compared to their intrinsic value; this is achieved by analyzing financial ratios.
• Growth Score: Targets stocks that show promising financial strength and are poised for sustainable growth as assessed through earnings, sales, and cash flows.
• Momentum Score: This is designed for those who look to capitalize on trends in stock prices or earnings estimates.
• VGM Score: A composite score for investors employing a mix of the three aforementioned investing styles, combining Value, Growth, and Momentum to identify all-rounded attractive investments.

Pairing Style Scores with Zacks Rank

To maximize returns, investors are recommended to look for stocks that not only have Zacks Rank #1 (Strong Buy) or #2 (Buy), but also possess high Style Scores (A or B). These indicators, when used together, help sift through numerous options to uncover stocks with the highest success probability.

Case in Point: Jakks Pacific

Take Jakks Pacific, a toymaker, as an example. The company holds a Zacks Rank #1 (Strong Buy) and has been awarded a VGM Score of A, making it an attractive pick for momentum investors. Its Momentum Style Score is B, and the stock has experienced an upsurge in value over recent weeks. Positive earnings estimate revisions also paint a compelling picture for potential investors.

Investors looking for stocks with robust earnings prospects and favorable momentum ought to consider companies like Jakks Pacific as integral components of their investment portfolios.

Zacks, Scores, Momentum