For Immediate Release
Chicago, IL – March 16, 2022 – Stocks in this week’s article are Devon Energy Corp. DVN, Cenovus Energy Inc. CVE, and Marathon Oil Corp. MRO
3 Stocks with Momentum Anomalies to Create a Winning Portfolio
When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that bets on frontrunner stocks. One of the most successful strategies in this day and age is to get in on momentum stocks at the right time.
We've all heard the adage, "the trend is your friend." At the core, momentum investing is "buying high and selling higher." It is based on the idea that once a stock establishes a trend; it is more likely to continue in that direction because of the momentum that is already behind it. But why does the momentum strategy work?
There are several behavioral biases that most investors exhibit in their decision-making. And these emotional responses, or rather mistakes, are the very reason that makes momentum strategy work.
For example, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hopeful of a rebound in prices. On the other hand, a few investors sell their winners way too early. Momentum investing is one of the best strategies to avoid making such errors in judgment.
Also, investors initially tend to underreact to news, events or data releases. However, once things become clear, they have a habit of going with the flow and overreacting, causing dramatic price reactions. These behavioral problems extend trends, thus opening up huge opportunities for momentum players.
So basically, it's a way to profit from the general human tendency to extrapolate current trends into the future. Thus, momentum investing is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child's play.
Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Here are three of the nine stocks that made it through this screen:
Headquartered in Oklahoma City, OK, Devon Energy Corp. is a major oil and gas producer in the United States with a multi-basin portfolio and world-class acreage position in the Delaware Basin. Devon Energy's disciplined cash-return business model is designed to achieve strong returns, generate free cash flow and return capital to shareholders. The stock has gained 124% in the past year but declined 12% in the past week. It has a Momentum Score of A.
Headquartered in Calgary, Canada, Cenovus Energy Inc. is an energy company with oil and natural gas production operations in Canada and the Asia Pacific region, and upgrading, refining and marketing operations in Canada and the United States. Cenovus Energy is focused on managing its assets in an innovative and cost-efficient manner, integrating environmental, social and governance considerations into its business plans. The stock has returned 83% in the past year but lost 8% in the past week. It has a Momentum Score of B.
Headquartered in Houston, TX, Marathon Oil Corp. operates as an independent exploration and production company in the United States and globally. Marathon Oil believes that improving all elements of its environmental, social and governance performance is foundational to maximizing long-term shareholder value. The stock has appreciated 93.5% in the past year but declined 8.8% in the past week. It has a Momentum Score of A.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Devon Energy Corporation (DVN) : Free Stock Analysis Report Marathon Oil Corporation (MRO) : Free Stock Analysis Report Cenovus Energy Inc (CVE) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research