Written by Rich B. Meier
TopEquityNews.com
Every Tuesday, TEN likes to dig into the holdings of some of the best-performing ETFs. Last week, it was mixed bag at the top of the performance leaderboard; so, we widened our scope to the monthly standings to look for anything eye catching.
Russell 1000 High Momentum ETF (HMTM) is a catchy name. We liked it so much that we peeled back the lid to what is inside.
HMTM is designed to deliver exposure to stocks with high medium-term momentum as determined by a screening and ranking methodology applied to the output of the Axioma U.S. Equity Medium Horizon Fundamental Factor Risk model. Medium-term momentum is a measure of a stock’s past price performance as measured by cumulative return over the last 250 trading days, excluding the last 20 trading days.
This philosophy delivered a 12.71% return during the last month of trading. Thirteen of the exchange fund’s holding outperformed the mother-ship during that timeframe. The names include:
El Paso Corp. (EP) up 26.49% with an Earnings Power Score of 7 out 12. GRADE: C
Cabot Oil & Gas Corporation (COG) up 26.33% with an 8. GRADE: B
Pioneer Natural Resources Co. (PXD) up 23.32% with a 9. GRADE: B
Panera Bread Co. (PNRA) up 22.63% with a 5. GRADE: C
Estee Lauder Companies Inc. (EL) up 17.74% with a 9. GRADE: C
Humana Inc. (HUM) up 16.7% with a 6. GRADE: C
SM Energy Company (SM) up 15.44% with a 9. GRADE: B
Concho Resources, Inc. (CXO) up 15.2% with a 7. GRADE: C
Caterpillar Inc. (CAT) up 14.79% with a 7. GRADE: B
Occidental Petroleum Corporation (OXY) up 14.5% with a 9. GRADE: B
CF Industries Holdings, Inc. (CF) up 13.6% with a 6. GRADE: C
Kansas City Southern (KSU) up 13.07% with an 8. GRADE: B
Apache Corp. (APA) up 12.87% with a 7. GRADE: C
Our grading system works just like a report card: A is the honor roll and Fs are for flunkies. The Earnings Power Score is based on 12 factors that are predictive of future earnings potential – the higher the score the better.
Based on valuations, TEN’s top pick from B graded companies in this group of momentum movers is Caterpillar Inc. (CAT). The Earth mover’s stock trades at a forward P/E of 10.7, while Wall Street expects CAT’s earnings to grow by almost 33%. At the finest higher learning facilities with $50,000 a year tuitions, the profs will teach that a 1 to 1 ratio of P/E to earnings’ growth is acceptable.
The major discount results in a PEG ratio of 0.59. According to a study done by Motley Fool, equities with a score under one tend to outperform the market on a consistent basis. Finally, CAT’s Return on Equity of 35.21% is the sort of ratio that attracts investors like Warren Buffet, and the Investor’s Business Daily reports that all the biggest long-term winners had a ROE of 17% or higher.
Analyzing Caterpillar’s stock chart, its price has bumped up against a multiple top around $97.50. If the heavy machinery company’s shares get ahead of resistance, then it is probably headed to $102.50 to $105. A breakout above the $105 level, and CAT should challenge and potentially surpass its 52 week high of $116.55.
In this volatile market, if CAT’s price drops, $90 would be a great place to jump in. The stock should get strong support there as it peaked near $90 a couple of times on the way up and is the current home of its 26 day-moving-average.
ETF Focus: This Kitty Could Roar Some More is an article from: 
