Join our community of smart investors

Making judgement calls on momentum shares

Will these momentum companies power on past the Omicron scare?
Making judgement calls on momentum shares
  • Some familiar companies have ranked highly on this month's momentum screens
  • Five main market and nine Aim companies pass all our tests

Markets clearly have a lot to try and price in on fears of even more restrictive measures to delay the inevitable spread of the Omicron coronavirus.  In such an environment there is always a danger that earnings forecasts are revised suddenly, so our earnings forecast and upgrade momentum screen results could be rapidly undermined and changed. Share prices may reflect the market’s concerns fastest, so the one month momentum test is worth paying particular attention to and most importantly, all screen ideas need to be further scrutinised before buying shares on the strength of them.

Top of the pile on our FTSE All Share screen is luxury retail business Watches of Switzerland Group (WOSG), the company passes all eight tests. It has enjoyed impressive momentum since Robin Hardy took a deep dive into the company in his Alpha report in June, although when Investors’ Chronicle last updated on the company earlier this month, the expanding valuation multiple was becoming more of a concern. 

Second on the FTSE All Share list is Auto Trader Group (AUTO).  The shares have done well on the basis of re-opening tailwinds, so this may be one to approach with caution. Certainly, when we last took a deeper look at the company in our Alpha analysis, longer term structural demand trends and potential for increased competition were still viewed with concern.

On Aim, online security specialist Kape Technologies (KAPE) is top of the screen. This is  an example of a company that had a bit of negative history in a previous incarnation (Crossrider) but when we wrote about it last month, the conclusion was it has decent prospects and didn’t warrant a discount valuation to other cybersecurity businesses. The market appears to be catching onto that view, with 3-month share price momentum of almost 14 per cent.

Download PDF