Price momentum and value investing are usually on opposite ends of the spectrum. Traditionally, value investors look for stocks whose share price has been beaten down, while momentum investors generally seek to buy new highs.
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However, the traditional way of doing things is usually not the optimal strategy in the stock market.
Consistently winning investors understand that value and momentum are not mutually exclusive. Momentum does not mean new highs, and value stocks are not always trading at their lows. Winning stocks often exhibit strong characteristics of both price momentum and value. In fact, this combination is a compelling way to locate top-performing stocks.
I have identified five of these rare stocks that possess both momentum and value right now.
Here are five value momentum stocks you need to know:
1. HCA Holdings (NYSE: HCA)
This health care holding company's shares are higher by nearly 50% this year. Owning 178 hospitals, 120 surgery centers, urgent care facilities, and emergency rooms, the company is well positioned to ride the bullish health care wave into the future.
HCA boasts a forward P/E ratio of just over 13 placing it solidly in the value zone despite the monster stock price surge in 2018.
I fully expect the upside momentum to continue as the company beat company beat analysts estimates in the last quarter and double-digit growth is forecast.
Getting long on a break out of $133.00 per share with a $153.00 per share target price and stops at $126.93 makes excellent risk/reward sense.
2. PCM, Inc. (Nasdaq: PCMI)
Talk about a value and momentum monster! This multi-vendor provider of technology solutions surged higher by an astounding 134% in 2018 alone.
PCM, Inc. just reported record gross margins, earnings and gross profits, yet still boasts a low forward P/E of under 10.
Shares of this momentum beast have pulled back slightly from the $25.00 zone highs but have launched another assault at the summit. Buying now in the $23.00 area with stops at $18.93 per share and a $37.00 per share target is the play.
3. Evertec (NYSE: EVTC)
A Puerto Rico-based payment processor that has soared by over 75% this year but maintains a forward P/E around 14, placing the shares firmly in the value category.
The company has a presence in 26 countries and recently raised its 2018 guidance. Evertec is benefiting from the rebuilding of Puerto Rico after the disastrous hurricane. While this shot in the arm for the company will eventually end, Latin American growth is on the upswing with a 48% revenue improvement in the second quarter.
High performance, the reinstatement of the dividend, and robust sales pipeline growth all paint a bullish picture for the future of Evertec.
Shares have pulled back from the $25.50 recent highs yet remain above support at both the 50- and 200-day simple moving averages. I like this stock at $24.00 per share with stops just below the 50-day SMA at $22.93 per share and a $28.00 per share target price.
4. JP Morgan Chase (NYSE: JPM)
I love financial stocks. Banking and finance have become the growth engines of America and the world. JP Morgan is a leader in the space with the shares climbing nearly 27% over the last 52 weeks. While only up just under 8% in 2018, the company's P/E ratio of around 14 makes it a value buy.
It is particularly interesting that JPM is part of ETFs focused on value and those focused on momentum. The fact that professional money managers see JPM as both a momentum and value stock is compelling.
Right now the shares have pulled back off the highs, and the technical picture looks a little iffy. Despite loving the company, waiting is the smart move. Enter longs on a break out above $118.00 per share with a target of $133.00 per share and stops at $114.93 per share makes sense right now.
5. Best Buy (NYSE: BBY)
The technical picture of this value/momentum stock screams "buy." Shares have fallen off their highs to the 50-day SMA, which acted correctly as support with the stock bouncing higher.
BBY remains 14% higher in 2018 despite the sell-off making the pullback a classic technical buy.
Retail has been beaten-down recently, but Best Buy appears to be executing on its strengths and benefitting from its market knowledge.
Buying now at $78.00 per share with stops set at $75.95 per share and an $85.00 per share target price.
Risks To Consider: There are many wild cards in the stock market going into the most bearish season of the year. Many analysts are also concerned about the new highs being posted without a significant pullback. While I firmly think there is upside left in the market and the above momentum/value stocks, anything can and does happen. Be ready for the unexpected!
Action To Take: Consider adding one or more of the above names to your long-term stock portfolio.