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Price Alert: G4s outperforms over three months

14th Oct '20 by Michael Green

Shares in G4s (LON:GFS) have performed strongly against the market in recent weeks. On a 3-month relative price strength basis, the price is up by 61.6%. Its last close price was 209.5p.

This kind of outperformance can be driven by any number of factors, but there's no doubt that strong near term moves appeal to momentum traders in search of recoveries and breakouts. While market sentiment has generally been bullish in recent months, there are still big concerns about the earnings outlook for many companies in the months ahead. 

The upside for G4s is that investor optimism is translating into positive price momentum, which is regarded as a leading predictor of future performance...


Trading the trend

Research by some of the investment industry's most respected strategists shows that relative strength can be one of the most consistently useful pointers to growth.

Price momentum is heavily influenced by psychology, with investors under-reacting and subsequently over-reacting to company news, driving prices higher over time.

The catch is that investor sentiment is prone to wild swings, which makes momentum risky when used on its own. Combining it with other factors, like attractive valuation, high quality and low volatility, can help reduce that risk.

Overall, the upward trend in the share price of G4s over the past three months is a promising sign. But while the stock has been outperforming recently, relying on momentum in volatile markets can be hazardous.

What does this mean for potential investors?

Shares in G4s have outperformed the market over the past three months - but momentum on its own is no guarantee of future returns.

To get a better idea about whether this trend will continue, it's worth doing some investigation yourself. Indeed, we've identified some areas of concern with G4s that you can find out about here.

Alternatively, if you'd like to find more shares with strong price momentum, you can find them on this Outperforming the Market screen.

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