Why a Top Momentum Stock Could be the Key to Enhancing Your Investment Portfolio

Investors, whether seasoned or newcomers, generally share the goal of maximizing their stock market gains and investing with assurance. A key approach to achieving this is by utilizing analytical tools and services that aid in making more informed investment decisions. One such method involves relying on predictive indicators that evaluate stocks based on certain investing philosophies, such as the well-regarded Zacks Style Scores.

Understanding Zacks Style Scores

The Zacks Style Scores are a series of ratings designed to complement the Zacks Rank. They assess stocks on three investing styles: value, growth, and momentum. A stock's Style Score is graded from A to F, where A indicates a higher probability of outperforming the market over the following month.

Value Score focuses on identifying stocks that are undervalued compared to their actual worth. Growth investors can turn to the Growth Score to find stocks with solid prospects for financial health and strength. Lastly, the Momentum Score helps in capturing the best times to invest in high-momentum stocks by analyzing the changes in price and earnings outlook.

Investors who prefer a holistic approach may find the VGM Score especially useful as it amalgamates all three styles to provide a comprehensive view.

How Style Scores Enhance the Zacks Rank

The Zacks Rank system is based on the power of earnings estimate revisions and has a track record of success—with the #1 ranked stocks seeing remarkable annual returns since 1988. However, with a multitude of highly rated stocks available, the decision-making process can be overwhelming.

This is where the Style Scores become instrumental. They aid in zeroing in on the best investment choices when used together with the Zacks Rank. For the highest likelihood of investment success, one should filter for stocks that carry a Zacks Rank of #1 or #2 coupled with Style Scores of A or B.

It's important to note that stocks with a lower Zacks Rank, even with high Style Scores, tend to have a depreciating earnings forecast, increasing the risk of a price decline. Consequently, a balanced approach that considers both the Zacks Rank and Style Scores can significantly elevate an investor's odds of success.

Case Study: Unum Group

As an example, Unum Group (UNM) is a financial services provider, who has been rated a #3 (Hold) by Zacks Rank, but has an impressive VGM Score of B, especially noting its Momentum Style Score of A. UNM has experienced a positive shift in its stock price over recent weeks, and analysts have upwardly revised earnings estimates for the upcoming fiscal year. This indicates that UNM could be a stock to watch for momentum investors.

The interplay of a sound Zacks Rank and robust Style Scores can make stocks like UNM attractive candidates for an investment portfolio, promising value, growth potential and momentum.

Investing, Strategy, Momentum