If you’re a high school student looking to crush your class stock market game, you need to pay attention to top stocks that can give you the edge. One stock that could help you come out on top is Stanley Black & Decker (SWK). While this toolmaker has had its ups and downs, it’s now shaping up to be a potential winner, just in time for you to use it in your high-risk, high-reward strategy—a key approach for short-term trading, like in your stock market game.

Stanley Black & Decker owns some of the most famous tool brands like Craftsman, DeWalt, and Black+Decker, and it caters to both consumers and industrial customers. During the pandemic, everyone seemed to be picking up tools to either renovate their homes or take on landscaping projects. This surge in demand sent Stanley Black & Decker’s sales soaring by 17% in 2021. But the good times didn’t last. In 2022, their organic sales dropped 3%, and in 2023, they fell another 7%. According to UBS analyst Damian Karas, this was partly because home retailers and distributors had overstocked on tools during the pandemic, anticipating continued high demand. But when interest rates started rising, it became more expensive for these distributors to keep such large inventories.

Karas explains, “You had this double whammy where the actual market started cooling down, and higher interest rates made it tougher for companies to finance their inventory.” This, along with rising costs, hurt Stanley Black & Decker’s margins. Their gross margin—a measure of profitability—dropped from 33% before the pandemic to around 26% in 2022 and 2023.

But here’s why this stock might be perfect for your stock market game. The company is making a comeback. Management has launched a major cost-cutting effort, aiming to get their adjusted gross margin back up to around 35% by the end of 2025. They’ve already made progress, hitting a 29.2% gross margin in the second quarter of this year—an improvement of over 5 percentage points from last year. This is where the momentum trading strategy can come into play. As Stanley Black & Decker’s performance improves and the market starts to notice, the stock could see significant gains. Momentum trading is all about riding the wave of a stock’s rising price, and right now, Stanley Black & Decker could be at the beginning of such a wave.

Karas, one of only two analysts currently recommending a “buy” on this stock, notes, “If everyone was modeling a 35% gross margin, this stock would be much higher. But investors need to see proof that the company can get back there.”

Another potential catalyst is interest rates. Lower interest rates could spur demand for home improvement and professional construction projects, which would directly benefit Stanley Black & Decker. Chief Operating Officer Christopher Nelson mentioned that their business is “fairly interest-rate sensitive” and that lower rates could mark “the start of the inflection point” for the company.

In simpler terms, if interest rates drop, more people will likely finance home projects and construction work, leading to higher sales for Stanley Black & Decker. And if this happens while the company is boosting its margins, the stock could take off. We’ve already seen a preview of this potential, as the stock has risen 28% since July 1st, thanks to a drop in 10-year Treasury yields.

Now, remember, this high-risk, high-reward strategy is perfect for short-term gains like in your stock market game, but it’s not the way to go for long-term investing. For building wealth and saving for future financial goals, you should focus on steady, reliable growth over time. Long-term investing is about making smart, well-researched decisions that compound over years or even decades, whereas short-term trading, like day trading or winning your stock market game, is about capitalizing on quick moves in the market.

In conclusion, if you’re aiming to win your high school stock market game, Stanley Black & Decker could be a top stock to consider. With a turnaround in progress and the potential for big gains as the market reacts to improved margins and lower interest rates, it could be just the kind of stock you need to secure that victory.