Finding stocks that are ready for profit is the key to success in the stock markets. Investors are naturally drawn to rising stocks – and while the past performance of any particular stock is no guarantee of future gains, momentum is a good indicator for determining price movements.
Momentum trading – buying stocks that showed solid gains and are likely to continue to rise – is a good strategy, but it does require some skill on the part of the investor. A savvy investor needs to know how to distinguish between a real momentum share and a fad.
The key is in the profile. Investors can look for stocks that offer a combination of three factors: strong, sustained earnings; highly optimistic ratings from Wall Street analysts; and upside potential pointing to the maintenance of further gains.
Based on that profile, we collected three momentum stocks using Investing Insights . Not only have all the tickers amassed enough bullish calls from analysts to get a & # 39; Strong Buy & # 39; consensus rating, but these stocks are also scoring a & # 39; Perfect 10 & # 39; smart score.
The platform gives each stock a one-digit score, based on the sum of 6 separate factors. The factors used are known to correlate with future overperformance; when they line up, this is a strong indicator for buyers to be aware of. Let's take a closer look.
Kulicke and Soffa Industries ( KLIC )
Industrial technology is big business. Every digital device we use, from smartphones and tablets to factory robots, relies on a series of linked tech, giving toolmakers and parts manufacturers a solid foundation for real momentum. Kulicke and Soffa (NASDAQ :), provides electronic assembly solutions in a variety of industries, including the automotive, communications, computing and consumer goods sectors. The company's product portfolio includes a range of tools for advanced packaging, electronics assembly, lithography and wire bonding.
In its most recent quarterly report, for the fiscal first quarter of 2021, KLIC reported $ 267.9 million at the top, an 85% year-on-year increase. Income was also made, with earnings per share of 77 cents. This was more than three times the 21 cents from a year ago.
The company attributed the strong quarter to increased demand in the second half of calendar year 2020. Looking ahead, management expects continued growth and sets fiscal Q2 forecast at $ 300 million in revenues (+/- $ 20 million ) and earnings per share. of 88 cents (+/- 10%).
The combination of industry and high-tech has benefited KLIC, whose stock has risen a whopping 143% in the past 12 months.
With regard to KLIC for B. Riley Securities, five-star analyst Craig Ellis believes the way is open for continued momentum.
“We are increasing the estimates of F21 and F22 … by three factors that support a purchase. First, upstream secular and cyclical chip foundations should drive strong growth deep into C22, pushing the estimation potential upward. Second, we believe new mini LED and Advanced Packaging products remain on track for $ 100 million in incremental F22 sales and more LT. Third, GM headwinds seem temporary in the short term, and we expect progress to 47.5% through F21 / 22, but the model is more conservative, ”noted Ellis. "
To this end, Ellis gives KLIC stock a Buy rating, and its $ 75 price target indicates confidence in a 26% rise for the coming year.
Although only three reviews have been registered for KLIC, they are unanimous – to buy the shares. This shows that Ellis' optimistic outlook is not an outlier, and gives the stock its Strong Buy analyst consensus rating. (See KLIC Stock Analysis)
ASML Holding (AS 🙂 ( ASML )
We will stick with the high-tech sector and look for another provider of the tools that manufacturers of digital equipment cannot live without. Specifically, ASML Holding (NASDAQ 🙂 designs and builds photolithography equipment, which is essential in semiconductor chip manufacturing. The company's tools use optical imaging to impress circuit patterns on silicon wafers. This is the essential process in chip making and ASML Holding has a 67% market share in its industry.
It's a niche industry, but it's one of the few that really & # 39; turns the world around & # 39; turns. And ASML has benefited enormously from its leadership position. The stock is up 131% in the past 12 months.
The Netherlands-based company recorded this increase in share against a backdrop of rising earnings. Sales increased in each of the last four quarters, reaching 4.4 billion euros (US $ 5.26 billion) in the first quarter of 2021. Earnings per share came to 3.21 euros (US $ 3.86 ), more than triple the $ 1.02 in 1Q20.
In the first quarter, the company reported strong customer demand, with bookings of 4.7 billion euros (5.69 billion dollars). Demand was especially strong in the Installed Base segment as existing customers moved to upgrading software to meet their own rising demand. In the background here is a semiconductor chip market seeing both increasing demand and severe supply shortage as customers rush to resolve backlogs during the pandemic shutdowns and suppliers rush to ramp up production from pandemic-induced low levels .
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With all that in the background, BofA analyst Didier Scemama selected ASML as his best choice for large caps in European semiconductors.
“We expect ASML to benefit from multiple drivers, incl. 1) Healthy competition between ASML customers, confirming ASML's status as & # 39; arms dealer & # 39; in the Intel / TSMC / Samsung process & # 39; war & # 39 ;, 2) Silicon sovereignty, prompting the EU / US to incentivize chip makers to re-produce semi-finished products and according to China & # 39; s ambitions for semi-self-sufficiency in 2025, 3) EUV cycle: we model 21% CAGR & # 39; 20-25 sales driven by multiple, simultaneously high-growth end markets, ”said Scemama.
Unsurprisingly, Scemama ASML is reviewing a Buy, and its $ 806 price target suggests a 20% increase over the next 12 months.
If we take a step back and look at the bigger picture, we can see that the stock generally has a "Strong Buy" analyst consensus rating. In the past three months, the stock has received 4 Buy ratings and only 1 Hold. (See ASML Stock Analysis)
Ashland ( ASH )
The third momentum choice, Ashland (NYSE :), occupies the specialty chemical niche, producing a variety of necessary ingredients for a range of industries. The company's products include adhesives, emulsifiers and preservatives – just to name a few categories – and are used in construction, coating, energy, food and beverage, health and wellness, packaging, pharmaceutical and transport sector. In short, Ashland is diversified.
That diversification has helped the company weather the corona crisis, pushing it to 62% equity gains over the past 12 months. These gains came even as the pandemic – and associated market, manufacturing, and supply disruptions – saw annual sales in 2020 drop to $ 2.3 billion from last year's $ 2.5 billion.
In its most recent quarter, Q1 of fiscal 2021, Ashland reported $ 552 million on the top line. This was 3.5% higher year-on-year and 1.6% higher than previous earnings estimates. Earnings per share were 99 cents per share, nearly double the 52 cents reported a year earlier – and 25% above expectations.
Analyst John McNulty, who weighs Ashland of BMO Capital, sees a clear path forward for the company.
“We are seeing a solid increase in margins in the coming years, a focus on innovation / growth that helps revenue and increased cash conversion … ASH continues to improve its cost structure and also accelerate its top level. line growth… Assuming management continues to execute and margins improve to 25% + while revenue growth improves to a mid-single digit level, ASH should see earnings growth significantly exceeding expectations while delivering multiple expansions at the same time. the analyst noted.
McNulty rates ASH stock as Outperform (i.e., buy), and his $ 115 price target implies a 22% rise for one year.
Wall Street analysts can be much controversial, but agreeing on a stock is a positive sign for investors to take note. That's the case here as all the recent reviews about ASH are up for sale, making the consensus rating a unanimous strong buy. (See ASH Stock Analysis)
For more ideas for stocks trading at attractive valuations, visit Investing Insights .
