Strong Earnings and Momentum Offer Investors a Winning Stock

Earnings season is winding down, following the statements from many big-name companies. But a company that’s been trending higher, combined with strong earnings, can trend even higher.

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  • Add in the high likelihood of a seasonal rally, and investors should target these companies to find a winner. The power of seasonality, stock momentum, and improving fundamentals from earnings is hard to argue against, even for a stock making a new 52-week high.

    One compelling opportunity now is Ross Stores (ROST). The discount retailer reported better-than-expected earnings last week, which sent shares to a new 52-week high.

    Retailers tend to be strong performers for the holiday season. And investors concerned about economic growth can still find it from discount retailers. Even with its big run higher, Ross is valued at just 23 times forward earnings.

    Action to take: With double-digit earnings growth and high single-digit revenue growth, Ross is well positioned for an end-year rally and even as a defensive stock going into 2024.

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  • At current prices, Ross pays a 1.1 percent dividend, which it’s slightly increased over time.

    For traders, the momentum remains to the upside. The February 2024 $135 calls, last going for about $3.20, could see high double-digit growth in the coming weeks.

    Traders may want to close out at the start of January, as the year-end market rally may show some weakness by then.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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