Why PBI Is a Top Pick for Value Investors

Understanding Momentum Investing

Momentum investing is a unique approach that deviates from the traditional "buy low and sell high" strategy. Instead of focusing on undervalued stocks, momentum investors aim to capitalize on rising trends by buying high and selling even higher. This method can be highly lucrative if executed correctly, as it leverages the power of ongoing price movements.

However, identifying the right entry point in a fast-moving stock isn't always straightforward. These stocks often experience a surge in value, but if their valuation exceeds their growth potential, they can quickly lose momentum. Investors who jump on board at the peak may find themselves holding expensive shares with limited upside or even losses. Thus, while momentum investing can be rewarding, it also carries significant risks.

A Safer Approach: Bargain Stocks with Momentum

To mitigate some of these risks, a more balanced approach involves investing in bargain stocks that also show recent price momentum. This strategy combines the benefits of undervaluation with the potential for growth, offering a more stable path to success.

One tool that helps identify such opportunities is the Zacks Momentum Style Score. Part of the Zacks Style Scores system, this score focuses on trends in a stock's price or earnings to determine its momentum potential. Another valuable resource is the 'Fast-Paced Momentum at a Bargain' screen, which helps spot stocks that are moving quickly but still offer attractive valuations.

Pitney Bowes: A Strong Candidate

Pitney Bowes (PBI) is one of the standout stocks that have passed through this screen. The company, known for its mailing equipment and software solutions, has shown promising signs of momentum and value.

Recent performance highlights include a 1.4% increase over the past four weeks, indicating growing investor interest. More impressively, PBI has gained 17% over the last 12 weeks, demonstrating sustained momentum. Additionally, the stock has a beta of 1.54, meaning it moves 54% faster than the overall market in either direction. This level of volatility suggests strong potential for both gains and losses, making it a stock that requires careful consideration.

The combination of strong price performance and favorable fundamentals has earned PBI a Momentum Score of A. This score indicates that now is an excellent time to enter the stock, as the probability of continued momentum is high.

Earnings Momentum and Valuation

Beyond price momentum, PBI has also shown positive trends in earnings estimates. Analysts have raised their expectations for the company, which typically leads to increased investor interest and upward pressure on the stock price. This aligns with the broader trend observed among Zacks Rank #2 (Buy) stocks, where momentum effects are particularly strong.

Despite its strong momentum, PBI is currently trading at a reasonable valuation. Its Price-to-Sales ratio stands at 0.98, meaning investors pay just 98 cents for every dollar of sales. This makes the stock an attractive option for those seeking growth without overpaying.

Other Opportunities and Tools

PBI is not the only stock that fits the criteria of fast-paced momentum at a bargain. Several other companies have also passed through the 'Fast-Paced Momentum at a Bargain' screen, offering additional investment opportunities.

For those looking to refine their stock-picking strategies, there are over 45 Zacks Premium Screens available, each designed to help investors beat the market. These screens cater to different styles and preferences, providing a wide range of options for various investment goals.

Enhancing Your Strategy

To ensure the effectiveness of any investment strategy, it's essential to evaluate its historical performance. The Zacks Research Wizard offers a powerful tool for backtesting strategies and exploring proven methods for selecting winning stocks. With access to a wealth of data and insights, investors can make more informed decisions and improve their chances of success.

By combining momentum investing with careful analysis and strategic tools, investors can navigate the markets more effectively and potentially achieve better returns.