What Makes Ally Financial (ALLY) such a Momentum: Buy Now?
Momentum investing is about following the recent trend of a stock, which can be either way. In the “long” context, investors “will essentially buy at a high price, but hope to sell even more”. And for investors who follow this methodology, it is essential to take advantage of trends in a stock’s price; once a stock sets a course, it is more than likely to continue moving in that direction. The goal is that once a stock takes 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 difficult to define. There is a lot of debate around which metrics are the best to focus on and what are shoddy indicators of future performance. The Zacks Momentum Style Score, which is part of the Zacks Style Scores, helps us solve this problem.
Below we take a look Ally Financial (ALLY), which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.
It’s also important to note that Style Scores work as a supplement to the Zacks Ranking, our stock rating system that has an impressive track record of outperforming. Ally Financial currently has a Zacks rank of # 2 (Buy). Our research shows that stocks ranked Zacks Rank # 1 (Strong Buy) and # 2 (Buy) and style scores of A or B outperform the market within the next month.
You can see the current list of Zacks # 1 Rank Stocks here >>>
Ready to beat the market?
In order to see if ALLY is a promising start-up pick, let’s take a look at some elements of the Momentum style to see if this auto finance company and bank hold up.
A good benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and whether buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors identify the best companies in a particular field.
For ALLY, stocks are up 1.99% over the past week, while Zacks Financial’s consumer lending sector is stable over the same time frame. Stocks look pretty good from a longer time frame, as the 7% monthly price change also compares favorably with the industry’s 1% performance.
Considering longer-term price metrics, such as performance over the past three months or the year, can also be beneficial. In the last quarter, shares of Ally Financial rose 25.19% and 239.02% last year. In contrast, the S&P 500 moved only 9.79% and 66.07%, respectively.
Investors should also pay attention to ALLY’s 20-day average trading volume. Volume is useful in many ways, and the 20-day average sets a good price / volume benchmark; a rising stock with above average volume is usually a bullish sign, while a falling stock with above average volume is usually bearish. ALLY currently has an average of 4,339,515 shares over the past 20 days.
The Zacks Momentum style score encompasses many elements, including estimate revisions and the movement of a stock’s price. Investors should note that earnings estimates are also important to the Zacks rankings, and a nice track here may hold promise. We recently noticed this with ALLY.
Over the past two months, 1 revenue estimate has increased compared to no less for the entire year. These revisions helped raise ALLY’s consensus estimate from $ 4.43 to $ 4.54 in the past 60 days. For the next fiscal year, 1 estimate has moved upwards while there has been no downward revision during the same period.
At the end of the line
Considering all of these, it’s no surprise that ALLY is a # 2 (Buy) stock with a Momentum Score of A. If you’re looking for a new pick that should increase in the short term, be sure to keep Ally Financial on your shortlist.
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