As concerns over a surge in inflation, rising COVID-19 cases, and a potential slowdown in economic activities continue to spook investors, it may not be smooth sailing ahead for the stock market. Amid this volatile environment, we think it is safer to focus on stocks that are maintaining strong momentum, while trading at relatively affordable prices. Thus, we believe cheap momentum stocks Foot Locker (NYSE:FL), Signet Jewelers (NYSE:SIG), and Guess? (GES) are solid picks now. Read on.Increasing COVID-19 cases due to the rapid spread of the highly transmissible Delta variants have been prompting new pandemic restrictions in the United States. According to Bianco Research President Jim Bianco, it could emerge as the “toughest risk for investors to get their head around.” In addition, fears surrounding the potential for a surge in inflation to push the Federal Reserve to abandon its accommodative monetary policy much sooner than intended have fostered significant volatility in the stock market.
With the consumer price index still surging and fears of a slowdown in economic activity still lurking, market volatility is probably here to stay for the foreseeable future. However, amid this environment, investors could bet on stocks that have generated momentum lately and are well-positioned to maintain their momentum irrespective of the market’s movements. Investors’ confidence in momentum stocks is evident in the Invesco DWA Momentum ETF’s (PDP) 6.9% returns over the past six months.
Foot Locker, Inc. (FL), Signet Jewelers Limited (SIG), and Guess?, Inc. (GES) have been witnessing solid momentum but look significantly undervalued at their current price levels. We believe these stocks are positioned to maintain their momentum in the near term.