The benchmark indices rallied on Tuesday, supported by better-than-expected third-quarter earnings in the retail sector and impressive retail sales data. The S&P 500 gained 0.53% to reach 4,707.90, close to its all-time high, while the Dow gained 133 points. The S&P 500 has gained 25% so far this year.

However, Goldman Sachs Group Inc. (GS) analysts expect the benchmarks to cool off late this year, rising by a modest 9% through year’s end 2022 due to decelerating economic growth and the cessation of fed monetary support. The equity benchmarks’ record rally amid expectations of tightening fed policy and inflation is raising concerns about market volatility. So, in this environment, we think it might be wise to bet on stocks that have gained momentum and have the potential to maintain it irrespective of market conditions.

Investors' interest in momentum stocks is evidenced by the SPDR Russell 1000 Momentum Focus ETF’s (ONEO) 32.1% gains over the past year, and 5.4% returns over the past month. Shares of Canadian Natural Resources Limited (CNQ), Signet Jewelers Limited (SIG), and Covenant Logistics Group, Inc. (CVLG) have gained significant momentum lately, which they have the potential to maintain, dodging the market’s volatility. Thus, we think these stocks could be solid additions to one’s portfolio for the rest of the year.

Canadian Natural Resources Limited (CNQ)

CNQ acquires, develops, produces, and markets crude oil, natural gas, and natural gas liquids. The company offers synthetic crude oil, light and medium crude oil, and thermal oil. It is based in Calgary, Canada.

On November 9, CNQ announced that it had entered  a definitive agreement with oil and gas exploration company Storm Resources Ltd. to acquire all the latter’s outstanding common shares at $6.28 per share. The acquisition is expected to provide CNQ with productive capacity and infrastructure that complements the company’s existing assets.

On November 4, CNQ declared a quarterly dividend of CAD0.5875 ($0.47 approximately) per common share, payable on January 5, 2022. The distribution reflects upon CNQ’s ability to repay its shareholders.

For its fiscal third quarter, ended September 30, CNQ’s revenue increased 71.2% year-over-year to CAD7.71 billion ($6.15 billion). Its net earnings improved 439.7% from the prior-year quarter to CAD2.20 billion ($1.76 billion), while its net earnings per common share rose 431.4% from the same period last year to CAD1.86.

The Street expects CNQ’s EPS to increase 13.6% year-over-year to $5.27 next year (fiscal 2022). Likewise, $24.16 billion the consensus revenue estimate for the coming year indicates a 4.5% rise  from the current year.

The stock has gained 99.4% in price over the past year and 73.7% year-to-date to close yesterday’s trading session at $41.78. It is currently trading above its 50-day and 200-day Moving Averages of $41.11 and $35.97, respectively.

CNQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

CNQ has a Momentum grade of A, and a Growth, Sentiment, and Quality grade of B. In the 49-stock Foreign Oil & Gas industry, it is ranked #5. The industry is rated A.

Click here to see the additional POWR Ratings for CNQ (Value and Stability).

Signet Jewelers Limited (SIG)

SIG, based in Hamilton, Bermuda, markets diamond jewelry, watches, and other products. The company operates through the segments of North America; International; and Other. It has multiple locations in the United States, Canada, and the United Kingdom.

On October 12, SIG announced that it had entered an agreement to acquire U.S.-based off-mall destination jeweler, Diamonds Direct USA Inc. Regarding the acquisition, Signet CEO Virginia Drosos said, "The accretive addition of Diamonds Direct to our portfolio will further drive shareholder value with its distinct bridal-focused shopping experience and add a new entry point as we build lifetime customer relationships and strive to reach our $9 billion revenue goal over time."

In August, the company reported two financial milestones. First, SIG renegotiated its $1.5 billion asset-based lending facility with the objective of increasing its financial flexibility. Second, the company entered long-term receivable purchase agreements, which were expected to remove its consumer credit risk.

SIG’s sales increased 101.4% year-over-year to $1.79 billion in its  fiscal second quarter, ended July 31. Its non-GAAP gross margin rose 220.2% from the same period last year to $717.60 million. Its total non-GAAP operating income and non-GAAP EPS came in at $223 million and $3.57, respectively, up substantially from their negative year-ago values.

A $10.16 consensus EPS estimate for the current year (fiscal year ending January 2022) indicates a 381.3% year-over-year increase. Likewise, the $7.15 billion consensus revenue estimate for the current year reflects a 36.7%  improvement from the prior year. Furthermore,  SIG has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.

SIG’s stock has gained 291.9% in price over the past year to close yesterday’s trading session at $105.03. It has gained 285.2% year-to-date. The stock is currently trading above its 50-day Moving Average of $91.70 and its 200-day Moving Average of $75.88.

It is no surprise that SIG has an overall A rating, which translates to Strong Buy in our POWR Rating system. SIG has an A grade for Growth, Momentum, and Quality, and a B grade for Value. It is ranked #4 out of the 63 stocks in the Fashion & Luxury industry. The industry is rated A.

To see the additional POWR Ratings for Stability and Sentiment for SIG, click here.

Covenant Logistics Group, Inc. (CVLG)

CVLG is a transportation and logistics services provider in the United States that operates through Expedited; Dedicated; Managed Freight; and Warehousing segments. The Chattanooga, Tenn.-based company primarily serves transportation companies and traditional truckload customers.

On September 9, CVLG announced the results of its Dutch Auction tender offer. It reported the purchase of 86,132 shares of the company’s Class A common stock at a final purchase price of $23.00 per share, which may enhance its capital allocation.

For the fiscal third quarter, ended September 30, CVLG’s total revenue increased 30.2% year-over-year to $274.56 million. Its adjusted operating income climbed 58.4% from the prior-year quarter to $21.24 million. And its adjusted net income and adjusted EPS stood at $17.27 million and $1.02, respectively, up 79.1% and 82.1% from the same period last year.

Analysts expect CVLG’s EPS to improve 72.1% year-over-year to $1.05 in the current quarter (ending December 2021). The Street expects its revenue to increase 24.2% from the prior-year quarter to $279.73 million.

The stock has gained 77.8% in price over the past year and 105.5% year-to-date to close yesterday’s trading session at $30.44. CVLG is currently trading above its 50-day and 200-day Moving Averages of $29.44 and $24.02, respectively.

CVLG’s POWR Ratings reflect this promising outlook. The stock has an overall A rating which equates to Strong Buy in our proprietary rating system.

CVLG has a B grade for Growth, Value, Momentum, and Quality. It is ranked #2 out of 22 stocks in the Trucking Freight industry. The industry is rated A.

In addition to the POWR Rating grades we have stated above, one can see CVLG ratings for Stability and Sentiment here.

CNQ shares were trading at $41.29 per share on Wednesday afternoon, down $0.49 (-1.17%). Year-to-date, CNQ has gained 73.51%, versus a 26.48% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

More...