‘Momentum’ Works Both Ways

The going has been rough lately for many “momentum” stocks, as The Times’ Power Ratings show.

Five of the top 10 momentum stocks as of May 18--as ranked by our first Power Ratings screen--have fallen since, as profit-taking has cooled once-scorching Internet-related shares such as brokerage Knight/Trimark, which led the original list but is down 28% since; EBay, down 26%; and brokerage Ameritrade Holding, down 24%.

In the latest Power Ratings update from Zacks Investment Research, as shown in the chart, Knight has skidded to eighth place while EBay and Ameritrade have tumbled all the way out of the top 50.

But several of May’s leaders have kept leading. No. 6 on the top-stocks list, Conexant Systems, is up 46% in price since May 18, when it ranked No. 8. The chip maker said it expects profit for the current quarter to beat estimates. Fast-growing wireless telecom firm Qualcomm, now No. 12, has risen 30% in price since May 18.

The Power Ratings are designed to show which stocks have the greatest recent upward, or downward, momentum by three measures: share price, earnings estimates and analyst ratings.

Momentum, of course, doesn’t last forever, but hot stocks can stay that way for quite a while. On the flip side, bargain hunters sometimes look for stocks with the greatest downward momentum as “contrarian” plays.

Software maker Aspect Development, the second-worst example of downward momentum in our May 18 list, is up more than 50% since, after striking a deal with Motorola and picking up several positive analyst recommendations.