Is there downside risk to the Prudential share price (LON:PRU) at 1,429p?

Is there downside risk to the Prudential share price (LON:PRU) at 1,429p?

Article image

Momentum is sticky and persists for longer than investors tend to anticipate. The downside of this is that stocks with recent negative momentum are likely to continue heading down.

This holds true on average, although there are, of course, exceptions. Trends reverse from time to time, but more often they stay the same - hence the name. Conservatism bias is the idea that people are slow to revise their expectations when presented with new information. 

The rational investor can take advantage of this mispricing. Stockopedia’s Momentum Rank is a convenient way of summarising the momentum attributes of a stock - let’s use Prudential (LON:PRUas an example.

How to spot Momentum opportunities

The Momentum Rank is inspired by the latest research into momentum from leading academics (including Jegadeesh and Titman, George and Hwang, and Seung-Chan Park) and is based on a composite of proven Price and Estimate Momentum metrics (you find out more here).

Each company in the market is ranked from 1 to 100 for each of these momentum ratios and a composite score is calculated as a weighted average of all valid values. Applying this to Prudential yields a Momentum Rank of 33. This could be worse, but it does mean that it's worth investigating whether Prudential has solid Value or Quality attributes to support its share price.


What does this mean for potential investors?

Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Prudential that you can find out about here.


About us

Stockopedia helps individual investors make confident, profitable choices in the stock market. Our StockRank and factor investing toolbox unlocks institutional-quality insights into thousands of global stocks. Voted “Best Investment Research Tools” and “Best Research Service” at the 2021 UK Investor Magazine awards.

Prudential's StockRank™

NeutralAdventurous

Prudential's StockRank™

With a StockRank of 29, Prudential is in the bottom 28% of the 7,586 stocks we cover in Europe, according to our proprietary ranking system.

See the full StockReport

Absolutely Perfect

"Trialed multiple other platforms - this is by far my favourite. Other platforms do not even have half the stuff that you can find on Stockopedia. Love it!"

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.