News

Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Allstate (ALL), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Allstate currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

Set to Beat the Market?

In order to see if ALL is a promising momentum pick, let's examine some Momentum Style elements to see if this insurer holds up.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For ALL, shares are up 1.88% over the past week while the Zacks Insurance - Property and Casualty industry is down 0.12% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 5.76% compares favorably with the industry's 2.79% performance as well.

While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Shares of Allstate have increased 17.13% over the past quarter, and have gained 54.82% in the last year. On the other hand, the S&P 500 has only moved 10.15% and 33.78%, respectively.

Investors should also pay attention to ALL's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. ALL is currently averaging 2,138,279 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with ALL.

Over the past two months, 9 earnings estimates moved higher compared to 1 lower for the full year. These revisions helped boost ALL's consensus estimate, increasing from $12.44 to $13.25 in the past 60 days. Looking at the next fiscal year, 3 estimates have moved upwards while there have been 2 downward revisions in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that ALL is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Allstate on your short list.

Zacks Reveals ChatGPT "Sleeper" Stock

One little-known company is at the heart of an especially brilliant Artificial Intelligence sector. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion.

As a service to readers, Zacks is providing a bonus report that names and explains this explosive growth stock and 4 other "must buys." Plus more.

Download Free ChatGPT Stock Report Right Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.