Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here is one stock with lasting competitive advantages and two not so much.
Two Momentum Stocks to Sell:
Advanced Energy (AEIS)
One-Month Return: +35.8%
Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ: AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.
Why Do We Think AEIS Will Underperform?
- Sales tumbled by 8.8% annually over the last two years, showing market trends are working against its favor during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.6 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Advanced Energy is trading at $111.29 per share, or 22.2x forward P/E. To fully understand why you should be careful with AEIS, check out our full research report (it’s free).
Orion (ORN)
One-Month Return: +42%
Established in 1994, Orion (NYSE: ORN) provides construction services for marine infrastructure and industrial projects.
Why Are We Out on ORN?
- Sales trends were unexciting over the last five years as its 2.4% annual growth was below the typical industrials company
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 10.1% annually
- Poor free cash flow margin of -0.2% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $7.24 per share, Orion trades at 44.6x forward P/E. Check out our free in-depth research report to learn more about why ORN doesn’t pass our bar.
One Momentum Stock to Buy:
Quanta (PWR)
One-Month Return: +31%
A construction engineering services company, Quanta (NYSE: PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.
Why Will PWR Outperform?
- Sales pipeline is in good shape as its backlog averaged 23.1% growth over the past two years
- Estimated revenue growth of 10.2% for the next 12 months implies its momentum over the last two years will continue
- Earnings per share have massively outperformed its peers over the last two years, increasing by 22.4% annually
Quanta’s stock price of $321.12 implies a valuation ratio of 30.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
