Insight & action

Buying Into the Power of Earnings Momentum


Five stocks and one common denominator: momentum.

The team at Ned Davis Research ( highlights momentum in this morning's report as the single important theme for stock selection in the current market. The five companies offered as examples have all strongly outperformed the broad market over the past year, driven by comparable momentum on the bottom line. More to the point, they've grown earnings faster than what analysts had forecast. NDR believes this single distinguishing factor is especially important now.

Value mattered in 2009 when virtually every stock was washed out. Today the opposite holds: Stocks are making new all-time highs, so continued outperformance favors those companies whose earnings are still accelerating...not those whose stocks are cheap.

Taking our cue accordingly, we screened the S&P 500 Index based on two simple criteria:

1. 2014 earnings growth forecasts of at least 20 percent

2. Upward earnings revisions by at least ten analysts during the past month

Twenty-four companies made our list, just 5 percent of the index. We shared 12 of them on-air, and we publish the full list below for the benefit of blog readers.

Alexion Pharmaceuticals Inc. (ALXN), Alliance Data Systems Corp. (ADS), Anadarko Petroleum Corp. (APC), Applied Materials Inc. (AMAT), Chipotle Mexican Grill Inc. (CMG), Computer Sciences Corp. (CSC), CR Bard Inc. (BCR), The Dow Chemical Co. (DOW), DR Horton Inc. (DHI), E*Trade Financial Corp. (ETFC), Electronic Arts Inc. (EA), EQT Corp (EQT), Facebook Inc. (FB), Gilead Sciences Inc. (GILD), Juniper Networks Inc. (JNPR), LyondellBasell Industries (LYB), Michael Kors Holdings Ltd. (KORS), Nabors Industries Ltd. (NBR), Inc. (PCLN), Range Resources Corp. (RRC), Thermo Fisher Scientific Inc. (TMO), Valero Energy Corp. (VLO), Vulcan Materials Co. (VMC), Xilinx Inc. (XLNX).

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