Top Momentum Stocks From 9 Different Sectors

Investors love stocks with momentum.

The nine-year-old bull market in U.S. stocks has been dominated by growth and momentum plays, such as the popular FAANG group of stocks. These momentum stocks have significantly outperformed value stocks, and Oppenheimer analyst Ari Wald says there’s no reason for investors to be fearful of momentum stocks just because stock prices are near all-time highs. After nine years, a certain degree of caution is understandable, but Wald says price action has remained bullish. Wald and the Oppenheimer analyst team recently selected the best momentum stock to buy in each of nine different market sectors.

Energy: Marathon Petroleum Corp. (ticker: MPC)

Wald says refiners are the best group within the energy sector, and Marathon Petroleum has significant long-term momentum following a breakout above $60 in late 2017. In addition to its positive momentum, Marathon recently raised its dividend by 15 percent and now yields about 2.1 percent. Even at its current payout, the stock’s relatively low 21 percent payout ratio suggests more hikes could be on the way in the near future. Marathon also recently diversified away from its Gulf-Coast-centric operations by acquiring Andeavor (ANDV) and its West Coast and Rocky Mountains assets for $23 billion.

Industrial: Roper Technologies (ROP)

Roper makes high-tech industrial equipment, and its stock has been red-hot as of late. ROP broke above $290 in July after months of consolidation and has stayed above that level ever since. The breakout was triggered by the company’s earnings beat and relatively strong earnings growth among its peer group. Revenue was up 14 percent in the most recent quarter, including 9 percent organic revenue growth. Demand is strong, and Wald expects the stock’s bullish momentum to continue.

Consumer discretionary: Netflix (NFLX)

Even after its huge run over the past decade, Oppenheimer says Netflix is still the top momentum stock pick in the consumer discretionary sector. NFLX stock took a hit following its disappointing third-quarter guidance, but its share price remained above $300 and above its 200-day simple moving average, preserving its long-term uptrend. Wald says post-earnings weakness is a buying opportunity. While Netflix’s cash burn is concerning to some potential investors, it certainly hasn’t held the stock down up to this point, even after years of the company pouring money into original content and international expansion.

Consumer staples: Church & Dwight Co. (CHD)

Church & Dwight owns popular household brands, such as Arm & Hammer, and Wald says CHD stock is one of the few names in the sector that is demonstrating bullish momentum at the moment. The company dealt with margin pressures in the most recent quarter stemming from rising commodity and transportation costs and product recalls. However, those pressures should moderate in the second half of the year, opening the door for full-year revenue growth approaching the double-digit level.

Health: UnitedHealth Group (UNH)

UnitedHealth got off to a difficult start to the month of September, but the health insurance and health care products giant has gained more than 3 percent since to maintain its bullish long-term momentum. UNH stock has stayed above its 50-day simple moving average, and Wald says the company holds a leadership position within the health care sector. Health care stocks could experience some volatility heading into the November election, but UnitedHealth’s modest forward earnings multiple, its impressive revenue growth relative to peers and its high-margin Optum services unit should help support the stock in the near term.

Finanical: American Express Co. (AXP)

The financial sector hasn’t demonstrated as much strength as many investors had hoped so far in 2018, with bank net interest margins remaining frustratingly low. However, American Express investors haven’t noticed the difficult environment. Early in 2018, AXP stock broke out to make its first new all-time highs since 2014. With the stock now over $100 for the first time, Wald says the 2018 breakout could be the beginning of a much larger long-term uptrend. After years of underperforming, American Express has out-gained its financial peers and kept pace with the overall market in 2018.

Real estate: American Tower Corp. (AMT)

Like the financial sector, the real estate sector has lagged the market this year. However, American Tower performed relatively well compared to many of its peers, and Wald says the real estate investment trust appears to be on the verge of finally breaking out of its long-term trading range of between around $130 and $150. Even if the breakout takes a while to materialize, investors will get paid a 2.2 percent dividend while they wait. American Tower’s portfolio of wireless communications towers should stay in high-demand as providers roll out their 5G networks starting this year.

Technology: Arista Networks (ANET)

The tech sector has had its share of momentum stocks in recent years, but Oppenheimer says Arista Networks is the top momentum play in the fourth quarter. The stock has been consolidating in a trading range of between $240 and $315 throughout 2018, but Wald says Arista has been forming a base ahead of its next major push higher. Demand for cloud networking solutions is unlikely to dry up any time soon, putting Arista in prime position to capitalize on the continued digitization of the global economy in coming decades.

Utilities: NRG Energy (NRG)

The utility sector has been one of the most difficult sectors for investors to navigate in the past year. However, since the beginning of 2016, NRG Energy found its mojo, and Oppenheimer says its bullish momentum should continue in coming quarters. NRG stock is already up 30.7 percent year-to-date, but Wald says the stock should continue upward to test its 2014 high at $38 in the near term. A breakout above that high would be an extremely bullish sign. With an earnings multiple of just 12.7, valuation certainly won’t hold NRG stock back.

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