The U.S. stock market is poised to end 2024 on a high, building on a remarkable bull run from early 2023. Despite minor setbacks, the S&P 500 has gained over 22% year to date. In a notable shift, the Federal Reserve recently enacted its first rate cut since 2020, reducing interest rates by 50 basis points, with another potential cut on the horizon. This policy pivot supports Wall Street’s continued upward momentum.

While the U.S. economy’s fundamentals remain strong, this month could see added volatility due to the upcoming Presidential election, an FOMC meeting and geopolitical tensions in the Middle East. To navigate these uncertainties, investing in stocks with robust price strength could be wise. By choosing stocks with consistent momentum, investors may harness their upward trajectory and benefit from their resilience in the ongoing rally.

At this stage, investors would be wise to consider stocks like Leidos Holdings LDOS, Peloton Interactive PTON, ZIM Integrated Shipping Services Ltd. ZIM, Brinker International EAT and Enova International ENVA based on their relative price strength.

Relative Price Strength Strategy

Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers or an appropriate benchmark.

If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.

Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months, at least, and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.

Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.

Screening Parameters

Relative % Price change – 12 weeks greater than 0

Relative % Price change – 4 weeks greater than 0

Relative % Price change – 1 week greater than 0

(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.

Leidos Holdings: The company is a global science and technology leader that serves the defense, intelligence, civil and health markets. The Zacks Consensus Estimate for 2024 earnings of Leidos Holdings indicates 22.7% growth. Headquartered in Reston, VA, LDOS has a VGM Score of A.