Severe volatility in the U.S. stock markets since the beginning of this year has been showing no sign of abatement. U.S. stocks have corrected significantly so far in 2022 after a fabulous rally in the last two pandemic-ridden years.
Complete devastation of the global supply-chain system, mounting inflation, a higher interest rate regime together with tighter monetary control, the war between Russia and Ukraine and lockdowns in China due to the resurgence of COVID-19 infections significantly dented investors' confidence in risky assets like equities.
Despite these negatives, it should be prudent at this stage to invest in mid-cap momentum stocks with a favorable Zacks Rank. Here are five such stocks — The Howard Hughes Corp. HHC, Wyndham Hotels & Resorts Inc. WH, Greif Inc. GEF, CVR Energy Inc. CVI and Avis Budget Group Inc. CAR
Why Mid-Cap Momentum Stocks
Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity and market share and may become large caps in due course of time.
If the economic recovery slows down due to any unforeseen internal or external disturbances, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.
On the other hand, if the crisis doesn't worsen, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.
On the other hand, momentum investing calls for the continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only ascend in the short to intermediate term.
Therefore, mid-cap momentum stocks with a favorable Zacks Rank are likely to become an ideal combination of investment at this stage.
Out Top Picks
We have narrowed our search to five mid-cap (market capital > $1 billion < $10 billion) momentum stocks that have solid upside left for the rest of 2022. These stocks have seen strong earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. You can see the complete list of today's Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Wyndham operates as a hotel franchisor primarily in Canada, Mexico, Colombia, Ecuador, Turkey, Germany, the UK, the Caribbean and Margarita Island in Venezuela. WH operates through the Hotel Franchising and Hotel Management segments.
The Hotel Franchising segment licenses its lodging brands and provides related services to third-party hotel owners and others. The Hotel Management segment provides hotel management services for full-service and limited-service hotels.
Wyndham has an expected earnings growth rate of 13.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 7 days.
Greif is engaged in the production and sale of industrial packaging products and services worldwide. GEF anticipates adjusted earnings per share between $7.45 and $7.75 for fiscal 2022, indicating 36% year-over-year growth at the midpoint. Greif has been witnessing strong demand in key end markets across its business.
GEF has been implementing price increases in response to robust demand and to combat cost inflation, which is likely to aid earnings. Greif's restructuring activities, which comprise optimizing and integrating operations in the Paper Packaging & Services segment, and rationalizing operations and closing underperforming assets in the Global Industrial Packaging segment, should drive savings. Its efforts to lower debt levels are commendable.
Greif has expected earnings growth of 36.8% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 7 days.
Avis Budget Group provides car and truck rentals, car sharing, and ancillary services to businesses and consumers. The ability of CAR to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.
Avis Budget Group operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. Fleet expansion and technology enhancement efforts by CAR are likely to enhance its offerings.
Avis Budget Group has expected earnings growth of 74.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the last 30 days.
CVR Energy is an independent refiner and marketer of high value transportation fuels. CVI is also a producer of ammonia and urea ammonia nitrate fertilizers. CVR Energy's petroleum business includes full-coking sour crude refinery in Coffeyville, KS.
In addition, CVI's supporting businesses include a crude oil gathering system serving central Kansas, northern Oklahoma and southwest Nebraska, storage and terminal facilities for asphalt and refined fuels in Phillipsburg, KS., and a rack marketing division supplying product to customers through tanker trucks and at throughput terminals.
CVR Energy has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 25.4% over the last 30 days.
The Howard Hughes operates as a real estate company engaged in the development of master planned communities and other strategic real estate development opportunities across the United States. HHC operates its business in two lines of business: Master Planned Communities and Strategic Development.
The Howard Hughes' Master Planned Communities segment consists of the development and sale of residential and commercial land, primarily in large-scale projects in and around Columbia, Maryland, Houston and Las Vegas. The strategic Development segment is made up of near, medium and long-term real estate properties and development projects.
The Howard Hughes has expected earnings growth of 67% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.7% over the last 30 days.
To read this article on Zacks.com click here.
Image sourced from Shutterstock
