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Momentum Stocks On The Move For July 22
Posted: Jul 22, 2008 16:48 PM by Glenn Curtis
While every individual investor in the market has complete control over his or her own investment decisions, there remains one market element that is almost always out of their control - momentum.
Market momentum can often make or break an investor's stock pick. You can choose to buy stock in a company with a truly outstanding business model with seemingly limitless potential, but if the market sours on the stock, it may take months, or even years, before the stock gets some positive momentum under its belt and begins to produce decent price appreciation.
At the same time, even a business of suspect quality can produce outstanding returns for investors who are able to get in on the stock early enough during a run of upward momentum that happens to occur. Regardless of the type of company, there are few experiences more enjoyable than watching the stock price of a company you own continue to surge upward day after day, while all that is required of the investor is to sit back and hold the stock as it continues to appreciate in value. (For an overview of momentum investing principals, read Riding The Momentum Investing Wave.)
Strength of Momentum and Earnings Growth Are Critical
There are plenty of different ways that market momentum can be created for a particular stock, but individual investors should be primarily concerned with how strong a stock's momentum is, and how likely that momentum is to continue in the future.
In order to gauge these factors, investors can simply take a look at the amount of recent price appreciation, and the rate at which the company's earnings are expected to grow in the future. This is based on the intuitive logic that the stronger a stock's recent momentum has been, the more likely it is to continue, while the greater its expected earnings growth rate is, the less likely the stock is to come crashing down, should its momentum falter.
With that in mind, here are five stocks that have risen by more than 10% over the past four weeks, and are expected to increase their earnings per share (EPS) by at least 20% year-over-year in their current full fiscal year
| Company |
Four-Week
Price Increase |
Market Cap. |
Children's Place Stores
(Nasdaq:PLCE) |
10.9% |
$1.18B |
|
Eastman Kodak
(NYSE:EK)
|
15.79% |
$4.23B |
EZCorp
(Nasdaq:EZPW) |
29.67% |
$671M |
Intervoice
(Nasdaq:INTV) |
32.08% |
$317M |
Nokia
(NYSE:NOK) |
13.26% |
$108B
|
| Data as of market close July 21, 2008 |
Children's Place the Place for Investors Too
I haven't always been a big fan of Children's Place. In fact, in an article I authored late last year I decried on the children's clothing retailer for lowering its earnings guidance and for some lackluster same-store-sales results. I finished up the article by saying, "I wouldn't even think of bottom fishing at this point." It turns out my instincts were fairly accurate. At that point the shares were trading at about $23.80, and by mid-January they pulled back to around $16.
However, in an article I penned in late May I pointed out that the company may have finally turned the corner. I was encouraged by the company's 12% jump in Q1 sales and 5% comparable-store-sales increase. (For more on evaluating these types of companies, check out Analyzing Retail Stocks.)
Since that last article hit the site, Children's Place has reported some good news. On July 10, it reported a June same-store-sales increase of 16%. That was well north of the 7.8% that analysts had expected.
According to Yahoo Finance, the full year earnings estimate has increased over the last 30 days to $1.84 per share from $1.78 per share. The estimate for next year has inched up from $2.33 to $2.38 per share. This may also possibly help explain some of the momentum in the stock.
Bottom Line
It looks like Children's Place has, indeed, turned the corner, but there is one word of caution: This space remains highly competitive and economic conditions remain uncertain. Determining trend and momentum is not hard after the fact; the hard part is getting in before it's too late.
When do you think these stocks will slow their upward run? Join the FREE Stock Picking Community to share your thoughts and see what other investors are saying.
By Glenn Curtis
Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.
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