Understanding Momentum Stock Potential for Your Investment Portfolio

When it comes to investing in the stock market, both new and seasoned investors aim to maximize their gains and invest with confidence. Achieving this can be significantly aided by using analytical tools designed to assist in decision-making. One such tool is the Zacks Style Scores, which serves as a guide for investors to discover highly-rated stocks that align with their individual investment style, thereby simplifying the stock selection process for potential portfolio additions.

Introducing the Zacks Style Scores

The Zacks Style Scores are a set of indicators that when used alongside the Zacks Rank—a model that predicts market success based on earnings estimate revisions—can greatly benefit investors. By assigning a rating from A to F for value, growth, and momentum qualities, the Zacks Style Scores offer a straightforward way to identify stocks with the best potential to outperform the market within the next 30 days, with 'A' being superior to 'F'.

Breaking Down the Style Scores Categories

Investors often have different approaches, and the Style Scores cater to various preferences. The Value Score is geared towards those who seek underpriced stocks relative to their true value, based on various financial ratios. Meanwhile, the Growth Score is for investors focused on a company's future growth potential and financial health, while the Momentum Score is designed for those who look to capitalize on current trends in stock prices and earnings outlooks. There's also the comprehensive VGM Score for those who incorporate all three investing facets. This aggregate score evaluates stocks based on a blend of value, growth, and momentum parameters.

The interplay of the Zacks Rank with the Style Scores is crucial. Higher Zacks Rank coupled with A or B Style Scores can significantly increase the probability of investment success. Stocks with a #1 (Strong Buy) or #2 (Buy) rank and high Style Scores are especially worth consideration. On the other hand, even an A or B Style Score may not compensate for a stock that is rated #4 (Sell) or #5 (Strong Sell), suggesting a declining earnings forecast and a probable decrease in share price.

Case Study: Array Technologies, Inc. (ARRY)

Consider Array Technologies, a significant player in the solar energy industry, known for its advanced solar tracking systems. ARRY's Momentum Style Score stands at B, and the stock has shown a positive trajectory over recent weeks. This is evidenced by a sizable earnings surprise average and upward revision in earnings estimates by analysts for the fiscal year. Such factors, coupled with a decent VGM Score, make ARRY a stock worth watching by investors searching for momentum in the renewable energy sector.

The information in previous versions of this article has been revised to correct inaccuracies.

investing, momentum, stock