Western Digital & 2 Momentum Stocks That Could Soar in 2026

The Driehaus Strategy: How to Spot Stocks With Strong Upside

Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around.” In line with this insight, the American Association of Individual Investors (“AAII”) considered the 50-day moving average one of the key criteria when creating a portfolio aligned with Driehaus’ philosophy.

It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading above its 50-day moving average, signaling an uptrend.

Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also prioritized in this strategy, which was designed to deliver better long-term returns. 

Research Wizard’s Key Criteria for Picking Winning Stocks

To make the strategy more profitable, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Momentum Score of A or B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

• Zacks Rank less than or equal to #2

Whether the market is good or bad, stocks with a Zacks Rank #1 or 2 have a proven track record of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here. 

• Last 5-year average EPS growth rates above 2% 

Strong EPS growth history ensures an improving business

• Trailing 12-month EPS growth greater than 0 and industry median

Higher EPS growth compared to the industry average indicates superior earnings performance 

• Last four-quarter average EPS surprise greater than 5%

Solid EPS surprise history indicates better price performance

• Positive percentage change in 50-day moving average and relative strength over 4 weeks

Positive percentage change in the 50-day moving average and the relative strength signal uptrend

• Momentum Score equal to or less than B

A strong momentum score suggests a favorable opportunity to capitalize on a stock’s upward trend with a higher probability of success.

These few parameters have narrowed the universe of more than 7,743 stocks to only 54.

Here are the top three of the 54 stocks: 

Western Digital 

Western Digital develops and sells HDD-based data storage devices and solutions across global markets. It has a Zacks Rank #2 and a Momentum Score of A. The trailing four-quarter earnings surprise for WDC is 10.1%, on average. The company’s expected earnings growth rate for the current year is 84.4% (read more: Chasing NVIDIA? Western Digital May Be the Smarter AI Bet). 

Caterpillar

Caterpillar provides construction and mining equipment, engines, turbines, and locomotives worldwide. It has a Zacks Rank #1 and a Momentum Score of A. The trailing four-quarter earnings surprise for CAT is 18.1%, on average. The company’s expected earnings growth rate for the current year is 39.6%. 

Datadog

Datadog provides cloud application monitoring and security solutions worldwide. It has a Zacks Rank #2 and a Momentum Score of A. The trailing four-quarter earnings surprise for DDOG is 15.4%, on average. The company’s expected earnings growth rate for the current year is 18.5%. 

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This article originally published on Zacks Investment Research (zacks.com).

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