For Immediate Release
Chicago, IL – March 15, 2017 - Stocks in this week’s article include Children's Place, Inc. (NASDAQ: PLCE – Free Report ), Broadcom Limited (NASDAQ: AVGO – Free Report ), Stoneridge, Inc. (NYSE: SRI – Free Report ), Inogen, Inc. (NASDAQ: INGN – Free Report ) and Customers Bancorp, Inc. (NYSE: CUBI – Free Report ).
Screen of the Week of Zacks Investment Research:
Adopt the Driehaus Strategy and Invest in These 5 Stocks
Investors with a high risk appetite often look for strategies that target healthy returns through investment in momentum stocks. One such strategy was devised by Richard Driehaus, banking on the "buy high and sell higher" principle. The popularity of the strategy earned Driehaus a mention in Barron’s All-Century Team.
Portfolios such as that of The American Association of Individual Investors (AAII) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five- and 10- year timeframe, respectively, compared with -1.1% and 4.2% gains for the S&P 500. Thus, investors with a high risk appetite may opt for this strategy to boost their portfolio returns.
A Look at Driehaus’ Strategy
After a detailed study of Driehaus’ strategy, AAII concluded that it mainly focuses on strong earnings growth rates and impressive prospects to pick potential outperformers. While this strategy was made to provide better returns over longer time frames, companies with a strong history of beating estimates were also given importance.
“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 a decline and try to guess when it will turn around,” Driehaus had said in an interview.
Screening Parameters
The percentage 50-day moving average is one of the key criteria 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. 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.
In order to make the strategy more profitable, we have only considered those stocks that have a Zacks Rank #1 (Strong Buy) as well as 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 or 2 offer the best upside potential.
• Zacks Rank equal to #1
(Only Strong Buy rated stocks can get through. 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 improving business.)
• Trailing 12 month EPS growth higher than 0 and industry median
(Higher EPS growth compared to the industry average indicates superior stocks.)
• Last four-quarter average EPS surprise greater than 5%
(Positive EPS surprise indicates potential.)
• Positive % 50-day moving average and relative strength over 4 weeks
(High % 50-day moving average and relative strength signal uptrend.)
• Momentum Score equal to or less than B
(Favorable momentum score indicates that it is ideal to take advantage of the momentum with the highest probability of success.)
These few parameters narrowed down the universe of over 7,892 stocks to only 18.
Here are five of the 18 stocks:
Children's Place, Inc. (NASDAQ: PLCE – Free Report ) is a growing specialty retailer of apparel and accessories for children from new born to 12 years of age. Children's Place has a Momentum Score of ‘A’ and an average four-quarter positive earnings surprise of 39%.
Broadcom Limited (NASDAQ: AVGO – Free Report ) is a designer, developer and supplier of analog and digital semiconductor connectivity solutions. Broadcom has a Momentum Score of ‘B’ and an average four-quarter positive earnings surprise of 6%.
Stoneridge, Inc. (NYSE: SRI – Free Report ) is an independent designer and manufacturer of highly engineered electrical and electronic components and systems. Stoneridge has a Momentum Score of ‘A’ and an average four-quarter positive earnings surprise of 19.1%.
Inogen, Inc. (NASDAQ: INGN – Free Report ) is a medical technology company. Inogen has a Momentum Score of ‘B’ and an average four-quarter positive earnings surprise of 49.1%.
Customers Bancorp, Inc. (NYSE: CUBI – Free Report ) is a banking services provider to small and medium-sized businesses, professionals, individuals and families. Customers Bancorp has a Momentum Score of ‘A’ and an average four-quarter positive earnings surprise of 9.7%.
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About Screen of the Week
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Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report
Broadcom Limited (AVGO): Free Stock Analysis Report
Stoneridge, Inc. (SRI): Free Stock Analysis Report
Inogen, Inc (INGN): Free Stock Analysis Report
Customers Bancorp, Inc (CUBI): Free Stock Analysis Report
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