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Momentum investing is essentially an exception to the idea of "buying low and selling high." Investors following this style of investing are usually not interested in betting on cheap stocks and waiting long for them to recover. Instead, they believe that "buying high and selling higher" is the way to make far more money in lesser time.
Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, investors find themselves loaded up on expensive shares with limited to no upside or even a downside. So, going all-in on momentum could be risky at times.
A safer approach could be investing in bargain stocks with recent price momentum. While the Zacks Momentum Style Score (part of the Zacks Style Scores system) helps identify great momentum stocks by paying close attention to trends in a stock's price or earnings, our 'Fast-Paced Momentum at a Bargain' screen comes handy in spotting fast-moving stocks that are still attractively priced.
There are several stocks that currently pass through the screen and Victoria's Secret (VSCO) is one of them. Here are the key reasons why this stock is a great candidate.
A dash of recent price momentum reflects growing interest of investors in a stock. With a four-week price change of 30.3%, the stock of this retailer of lingerie, pajamas and beauty products is certainly well-positioned in this regard.
While any stock can see a spike in price for a short period, it takes a real momentum player to deliver positive returns for a longer time frame. VSCO meets this criterion too, as the stock gained 92.1% over the past 12 weeks.
Moreover, the momentum for VSCO is fast paced, as the stock currently has a beta of 2.19. This indicates that the stock moves 119% higher than the market in either direction.
Given this price performance, it is no surprise that VSCO has a Momentum Score of A, which indicates that this is the right time to enter the stock to take advantage of the momentum with the highest probability of success.
In addition to a favorable Momentum Score, an upward trend in earnings estimate revisions has helped VSCO earn a Zacks Rank #2 (Buy). Our research shows that the momentum-effect is quite strong among Zacks Rank #1 and #2 stocks. That's because as covering analysts raise their earnings estimates for a stock, more and more investors take an interest in it, helping its price race to keep up. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>