Riding the Momentum Wave: How URBN, RGLD, and KGS Thrive in Tariff Turbulence

As global markets grapple with the uncertainty of fresh tariff salvoes, momentum investing has emerged as a contrarian strategy to capitalize on short-term dips in high-growth stocks. Zacks' Momentum Anomaly Strategy—which targets stocks with strong 52-week performance and recent pullbacks—offers a roadmap for investors seeking to profit from market swings. Urban Outfitters (URBN), Royal Gold (RGLD), and Kodiak Gas Services (KGS) exemplify this approach, blending sector resilience, cash flow stability, and alignment with macro trends to create compelling opportunities. Here's why these stocks warrant attention now.

The Case for Momentum in Volatile Markets

Zacks' framework identifies stocks that have surged over 12 months but dipped in the past week, creating a “sweet spot” for contrarian buyers. The strategy assumes that short-term volatility often overshadows long-term momentum, especially during periods of geopolitical tension. With tariffs spooking investors, the recent dips in URBN (-4.2%), RGLD (-9.8%), and KGS (-3.8%) present entry points for those confident in their fundamentals.

Why Zacks' Momentum Score Matters

• URBN (B): A 63.6% annual gain despite a week of losses signals underlying strength in its lifestyle retail model.
• RGLD (A): Gold's safe-haven appeal, paired with a 22% annual rise, makes this a contrarian play as precious metals stabilize.
• KGS (A): The energy infrastructure provider's 25.3% yearly gain reflects demand for oil/gas services, even after a minor correction.

The Momentum Score acts as a filter, prioritizing stocks with robust long-term trends while ignoring noise from short-term sentiment shifts.

Sector Resilience: Where URBN, RGLD, and KGS Excel

Urban Outfitters (URBN): Retail's Digital Pivot

URBN's 63.6% annual surge reflects its post-pandemic pivot to omnichannel retailing, leveraging e-commerce and experiential stores to attract younger demographics. While its quarterly operating cash flow dipped 43.5% YoY, its TTM cash flow of $882M remains solid. The company's focus on “lifestyle curation”—think niche brands like Free People and Anthropologie—aligns with evolving consumer preferences.

Investment Thesis: A $5 price floor and Zacks Rank #1 suggest URBN is undervalued after its recent dip. The pullback may be overdone, given its 256.9% cash flow rebound in 2024.

Royal Gold (RGLD): The Gold Streamer's Edge

RGLD's 22% annual gain underscores its advantage as a streaming company: it avoids mining's operational risks by buying royalties on existing mines. With gold prices stabilizing near $2,000/oz, RGLD's cash flow per share ($2.07 quarterly) remains robust. While debt levels aren't disclosed, its diversified asset base—spanning gold, silver, and copper—buffers it from single-sector volatility.

Investment Thesis: The 9.8% weekly drop may be exaggerated, as tariffs have little direct impact on gold's demand. RGLD's A Momentum Score signals a high-reward/low-risk entry.

Kodiak Gas Services (KGS): Energy Infrastructure's Quiet Growth

KGS' 25.3% annual rise mirrors the energy sector's revival, driven by rising oil prices and infrastructure spending. Its Q1 2025 operating cash flow of $114.3M (up 105% YoY) and free cash flow of $47.2M highlight financial health. With a leverage ratio of 3.7x (down sequentially) and a dividend hike, KGS balances growth with shareholder returns.

Investment Thesis: The 3.8% dip offers a chance to buy into North America's energy renaissance. KGS's A Momentum Score and $4.25 free cash flow yield (vs. 3.7x debt/EBITDA) suggest it's primed for further gains.

The Contrarian Play: Act Before Mean Reversion

The Zacks Momentum Anomaly Strategy hinges on the idea that overreactions to short-term news create buying opportunities. For investors, the window is narrowing:

1. URBN: Despite cash flow volatility, its omnichannel model and Zacks Rank #1 justify a $40–45 price target.
2. RGLD: Gold's macro tailwinds and RGLD's 22% annual gain suggest a rebound to $50+, from its current $45.
3. KGS: With $188.8M annualized free cash flow and a 96.9% fleet utilization, KGS could hit $40+, up from $36.

Final Take

In a market rife with tariff-induced uncertainty, momentum-driven stocks like URBN, RGLD, and KGS offer asymmetric upside. Their alignment with sector trends, cash flow stability, and Zacks' contrarian filter make them buys now—before mean reversion closes the gap. The key is to act decisively: these dips may not last long enough for procrastinators.

Investment recommendation: Consider a 5% allocation to each stock, with a 12-month horizon. Pair with stop-losses at 10% below entry prices to manage volatility.

Data as of July 7, 2025. Past performance does not guarantee future results.