I love trading momentum stocks into earnings season.
Forget about oil. Forget about tariffs. Forget about stocks being over-bought. And forget about stocks with low valuations.
None of it matters.
Momentum stocks ignore the noise and make their move because investor’s pile in on big price swings based on gangbuster earnings reports.
When earnings are reported, investors can focus on the one thing that does matter:
Are you growing profits or not?
Earnings season is just around the corner and here are 3 momentum stocks that could easily beat their numbers for big gains.
Shopify Inc. (NYSE: SHOP) proves the point. This Canadian e-commerce platform provider has been a favorite of the momentum crowd since they IPO’d in 2015, and for good reason: They keep delivering profits.
E-commerce platform provider Shopify helps individuals and small businesses set up shop online and build their brands.
A relentless profit growth machine with a forward PE of 330 … but valuation matters little to SHOP stock.
When you can beat earnings estimates quarter after quarter like Shopify did again in early August, you’re going to make money.
This stock is only up 184% this year!
In the case of a bad news/good news driven market, momentum names like Shopify are poised to rocket higher if earnings surpass expectations.
Here you have a stock that trades for a premium valuation and it goes up 12% after its stellar earnings report. Give me more, please!
Have I Got a Name for You
When I suggested momentum names would pop this earnings season, another top name on my list was SNAP INC. (NASDAQ: SNAP).
Snap… (formerly Snapchat) is the social media company featuring disappearing photo and video sharing has been has seen it’s active user base jump to over 200 million in the last 3 months.
Investors are getting clued in. Several investment firms projecting another 30% growth over the next 12 months upgraded the stock.
And that’s coming on the heels of a 220% gain the stock this year.
Those gains are just the start. When SNAP reports results next month, the real fireworks begin.
How likely is it that Wall Street has estimates pegged correctly? Not a chance; not with such a hot-selling social media companies like SNAP.
The key for any momentum stock like SHOP or SNAP is to keep beating the number.
That’s what I expect when SNAP reports. When they do, you can profit knowing the stock will likely jump 10-15% higher in the day of trading after the news is released.
My Third Name to Watch …
Ok, it’s a shoe company…but not a “me too” brand but a leading edge product monster.
Skechers (NYSE: SKX) is popular with “millennials” and “baby boomers” whose ever-ending pursuit of the next hot fashion has made the company a “go-to” destination.
Yeah, Nike recently filed a lawsuit against them…but that should only fuel the short-term growth story.
The stock had great earnings in the last quarter and has emerged as a popular and affordable “American” brand in overseas markets with explosive growth in Asia…even through the tariff wars.
Recently Skechers has been considered a value play by investors … sporting a reasonable 14.39 forward PE compared to the sports industry average of around 25.
Based on their earnings outlook, many experts consider this stock undervalued.
But after beating earnings 3 out of the last 4 quarters, this stock has been on a tear up 69% year-to-date.
Let’s see if they can do that again this month.
Bonus Momentum Stock
Let me throw in a bonus momentum stock that could see blowout earnings yet again this quarter.
For those investors a little less risk averse, how about tech giant Microsoft (NASDAQ: MSFT)?
Giant companies like Microsoft don’t see their stock get up and start running.
The stock is up 41% this year.
Cloud computing is booming and along with Amazon and Google, Microsoft has emerged a major player with their recent acquisition of Red Hat.
ETF’s and mutual funds are pouring money into safer big tech names like Microsoft.
And the old standby: Stock buyback as MSFT spent $16.3 billion in 2018 and continues on that same path in 2019.
Put that altogether with another stellar earnings report and Microsoft stock has more room to run.
Can a big tech stock sustain this kind of growth?
It appears so for now…the stock is up over 250% over the last 5 years.
Enjoy the ride.
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