Research has consistently shown that momentum investing — buying stocks that have already gone up in price on the hope that they will continue doing so — can work extremely well for investors.
So it’s always worth keeping an eye out for companies making positive moves in the market and here are two of July’s biggest winners from lower down the spectrum.
On the mend
Despite an awful 2018 in which the share price pretty much halved in value, I’ve always had a soft spot for veterinary services provider CVS Group (LSE: CVSG). After all, pet-obsessed Brits spend a huge (and growing) amount of money on their companions every year. That won’t change, regardless of what happens on 31 October.
Aside from operating in a resilient industry, last week’s update for the year to the end of June also suggested trading at CVS has bounced back to health. At £406.5m, total revenue was 24.2% higher than in 2017/18. Earnings are also expected to be in line with the new targets set by analysts following the company’s positively-received update in June.
Importantly, CVS revealed it had seen a fall in the number of vacancies for veterinary surgeons and nurses — an issue that had dogged the company for some time. This has, in turn, led to a reduction in locum spend and overall employment costs over H2.
In other good news, the firm said the disappointing performances of its three new divisions (The Netherlands, Farm and Equine) earlier in the financial year had been reversed as a result of actions taken by management. Existing holders may also be reassured by the decision to adopt a more cautious approach with regard to future acquisitions to ensure the company doesn’t overpay in attempts to expand its estate.
Shares in CVS are up 25% in July and currently trade on a valuation of 19 times forecast FY2020 earnings. While not exactly cheap, I think anyone buying at this level will probably still do well, considering the recent return to form.
Another market minnow making impressive gains over the last month has been driver monitoring specialist Seeing Machines (LSE: SEE). Shares in the £140m-cap — whose technology helps spot when people are tired or distracted behind the wheel — have accelerated 42% in July alone, thanks to a flurry of positive news.
Only yesterday, the company revealed it had won a four-year contract with coach operator National Express to have its Guardian Driver Safety system fitted in around 700 of the latter’s vehicles by the end of 2019.
This win follows hot on the heels of last week’s announcement that Seeing’s FOVIO driver monitoring system (DMS) had been selected by an automotive Tier 1 supplier to be installed in additional models for an existing German OEM customer in an effort to meet the safety targets set down by the European New Car Assessment Programme.
“This important milestone confirms Seeing Machines’ ability to scale our technology and participate in a broadening DMS market, including entry level solutions targeting Euro NCAP goals,” said new CEO Paul McGlone.
With the European Parliament also calling for driver monitoring technology to become mandatory in all new cars sold in Europe from 2022, I’m optimistic that Seeing Machines will continue attracting more attention from (risk-tolerant) investors going forward.
Paul Summers owns shares in Seeing Machines. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.