Despite Rapid Growth, Wolverine (WWW) Remains an Undervalued Stock

Momentum Investing: A Different Approach

Momentum investors generally do not attempt to predict market movements or follow the traditional strategy of "buying low and selling high." Rather than purchasing undervalued stocks and waiting for a turnaround, they focus on the philosophy of "buying high and selling even higher," aiming to generate greater returns in a shorter period.

The Challenge of Riding Trends

Chasing stocks that are rapidly gaining popularity can be appealing, but pinpointing the ideal moment to invest is often difficult. Frequently, these stocks lose their upward drive once their valuations outpace their growth prospects, leaving investors with costly shares that offer little potential for gains—or even risk losses. Therefore, relying solely on momentum can sometimes be hazardous.

A Balanced Strategy: Value Meets Momentum

A more prudent method involves targeting undervalued stocks that are also showing positive momentum. The Zacks Momentum Style Score, part of the system, helps identify strong momentum stocks by analyzing price and earnings trends. Additionally, the 'Fast-Paced Momentum at a Bargain' screen is useful for finding fast-moving stocks that remain attractively priced.

Spotlight: Wolverine World Wide (WWW)

One standout from this screening process is Wolverine World Wide (WWW). Here are some key reasons why WWW is a compelling choice:

• Growing investor interest is evident in WWW’s recent 1.2% price increase over the past four weeks, highlighting its current momentum.
• Beyond short-term gains, WWW has delivered a 1.7% return over the last 12 weeks, demonstrating sustained momentum.
• With a beta of 1.88, WWW tends to move nearly twice as much as the overall market, reflecting its fast-paced nature.
• WWW currently holds a Momentum Score of A, suggesting now may be an opportune time to capitalize on its upward trend.

Strong Fundamentals and Attractive Valuation

In addition to its momentum, WWW has benefited from upward revisions in earnings estimates, earning it a Zacks Rank #2 (Buy). Research indicates that stocks ranked #1 or #2 by Zacks often experience strong momentum, as positive analyst revisions attract more investors and drive prices higher.

Despite its rapid momentum, WWW remains reasonably valued. Its price-to-sales ratio stands at just 0.77, meaning investors pay only 77 cents for each dollar of sales, making it an appealing bargain.

With these factors in mind, WWW appears well-positioned for continued growth at a brisk pace.

Other Opportunities and Tools for Investors

Besides WWW, several other stocks currently meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen. Investors may want to explore these options and stay alert for new candidates that fit this strategy.

There are also more than 45 designed to help investors find winning stocks tailored to their individual investing styles.

To ensure your stock-picking strategy is effective, it's important to verify its historical performance. The Zacks Research Wizard allows you to backtest strategies and access some of the firm’s most successful approaches.