One of the best market conditions for active traders is when price momentum underperforms and then kicks back in with a vengeance. Given what we have experienced since July, that could be a scenario we are about to enter. The market has been putting in a grinding, sideways move and may be getting ready for a jump higher, especially if earnings start to pick up.
A new research report from Jefferies focuses on a bounce-back for momentum stocks, and it notes that when price momentum has been as bad as it has been recently, it tends to rebound in a big way. The analysts screened the firm’s research universe and found 25 stocks rated Buy that, as they put it:
Sit in the top quintile based on our one-month change in 200-day moving average of price momentum, and carry a market cap above $2 billion inside of the Russell 2500 Growth
These five look especially attractive for traders.
Advanced Micro Devices
This chip stock has been on a roll, and some on Wall Street think the company is a buyout candidate. Advanced Micro Devices Inc. (NYSE: AMD) is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and server processors and chipsets.
The company also offers microprocessors for server platforms under the AMD Opteron brand; embedded processor solutions for interactive digital signage, casino gaming and medical imaging under the AMD Opteron, AMD Athlon, AMD Sempron, AMD Geode, AMD R-Series and G-Series brands; and semi-custom System-on-Chip products that power the Sony PlayStation 4 and Microsoft Xbox One game consoles.
The Jefferies price target for the stock is $9, and the Wall Street consensus price objective is $6.12. The stock closed Monday at $6.84 per share.
This is a top pick among the data center stocks. CyrusOne Inc. (NASDAQ: CONE) designs, builds and operates facilities across the United States, Europe and Asia that give its customers the flexibility and scale to match their specific growth needs. Specializing in highly reliable enterprise-class, carrier-neutral data center properties, the company provides robust data center infrastructure to ensure the continued operation of IT equipment for a rapidly growing list of organizations that now nears 900, including nine of the Fortune 20 and more than 160 of the Fortune 1000 or equivalent-sized companies.
Many analysts feel that some of the best returns in the data center sector may be found in the smaller players in the space like CyrusOne. The company trades at numerous lower multiples than its bigger competition, and the Jefferies team feel that the discount valuation is not warranted given the recent surge in leasing and above-average growth. The company has also exhibited faster deployment times, rapid new market expansion and low churn among customers — all bullish reasons for buying the stock.
CyrusOne unitholders receive a 3.24% distribution. Jefferies has a $63 price target on the stock, and the consensus target is set at $60.18. The shares closed most recently at $46.95.