3 High-Momentum Stocks Poised for Big Gains Right Now

The Driehaus strategy can be used to identify the strongest momentum stocks. It follows the principle of “buy high and sell higher" investment philosophy, a successful investment approach that helped Richard Driehaus earn a spot on Barron’s All-Century Team.

With that in mind, stocks like Strategic Education, Inc. STRA, TechnipFMC plc FTI and Orla Mining Ltd. ORLA have been identified as today’s top momentum picks using the Driehaus strategy.

A Detailed Look Into the Driehaus Strategy

Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around.” In line with this insight, the American Association of Individual Investors (“AAII”) considered the percentage 50-day moving average as one of the key criteria before creating a portfolio following Driehaus’ philosophy.

It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend.

Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also given importance in this strategy, which was made to provide better returns over the long term.

Screening Parameters Using Research Wizard:

To make the strategy more profitable, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) and a Momentum Score of A or B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1, offer the best upside potential.

• Zacks Rank equal to #1

No matter whether the market is good or bad, stocks with a Zacks Rank #1 have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

• Last 5-year average EPS growth rates above 2%

Strong EPS growth history ensures an improving business

• Trailing 12-month EPS growth greater than 0 and industry median

Higher EPS growth compared to the industry average indicates superior earnings performance

• Last four-quarter average EPS surprise greater than 5%

Solid EPS surprise history indicates better price performance

• Positive percentage change in 50-day moving average and relative strength over 4 weeks

Positive percentage change in the 50-day moving average and the relative strength signal uptrend

• Momentum Score equal to or less than B

A favorable momentum score indicates that it is ideal for taking advantage of the momentum with the highest probability of success.

These few parameters have narrowed the universe of more than 7,743 stocks to only 14.

Here are three of the 14 stocks:

Strategic Education

Strategic Education provides campus-based and online post-secondary education, along with programs that build job-ready skills. It has a Momentum Score of A. The trailing four-quarter earnings surprise for STRA is 19.9%, on average.

TechnipFMC

TechnipFMC provides technologies, systems and services for global oil and natural gas projects. It has a Momentum Score of A. The trailing four-quarter earnings surprise for FTI is 15.9%, on average.

Orla Mining

Orla Mining explores, develops and operates mineral properties. It has a Momentum Score of B. The trailing four-quarter earnings surprise for ORLA is 9%, on average.

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Strategic Education Inc. (STRA): Free Stock Analysis Report

TechnipFMC plc (FTI): Free Stock Analysis Report

Orla Mining Ltd. (ORLA): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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