In this piece, we will take a look at the 13 best momentum stocks to buy now. If you want to skip our overview of the different kinds of trading strategies and some latest stock market news, then you can take a look at the 5 Best Momentum Stocks To Buy Now.
When it comes to trading, a strategy can typically follow two different directions. One of the more commonly understood trading strategies is trading by the fundamentals. This strategy looks at a firm’s ability to make money, and it analyzes the income statement and the balance sheet to take stock of costs, assets, and other financial metrics that could hint at growth in the future and the corresponding share price appreciation.
The second direction or strategy is played by the technical indicators. As opposed to looking at fundamentals such as earnings per share or dividends, a technical trading approach instead analyzes share price trends and movements. It takes stock of a variety of factors such as the volume of shares traded, whether a stock is overbought or oversold if its share price is above or below long term averages, and the percentage of returns delivered by the price. By combining these factors, technical analysts believe that they capitalize on emerging market trends before they blow up and make a profit.
One kind of technical trading strategy is called momentum trading. For those out of the loop, analyzing a stock’s momentum is unrelated to its balance sheet. Instead, it involves looking at the share price movements to see whether further upside or downside is present to merit an investment decision. Inside the momentum trader’s toolkit are several ‘tools’ such as average directional indexes, moving averages, stochastic oscillators (also called a relative strength index (RSI)), and simple trend lines that gauge whether current share price levels are part of a broader upward or downward trend.
Together, these allow for informed decision making. For instance, let’s consider a hypothetical stock A. A has an RSI reading of 19, a long term upward share price trend, and an ADX reading of 40. This might lead an investor to correctly conclude that since the RSI reading indicates that the stock is oversold, and the share price is trending upwards, then a high ASX reading could potentially present a chance for a profit since it indicates the presence of a trend. Of course, just as all investment decisions should be made after consulting a qualified investment professional, trying to read the technical tea leaves can yield better results if conclusions like the one in our example are also evaluated along with a fundamental reading. So if Stock A has high debt and falling revenue, then unless insiders or institutional investors know something that the broader market does not, it might not be worthwhile to wager holding A for a long time period.
With that out of the way, one way in which momentum stocks benefit is through the effects of macroeconomic news, events, and developments on the stock market. Throughout 2022 and 2023, the market has been held hostage by these events if we’re being honest. Whether it’s predictions of a recession, interest rate hikes, or high inflation, the market has seen investors flip between being bears and bulls depending on the nature of the data set. Right now, all eyes are on the Federal Reserve and the inflation readings for January 2024 that will help investors decide when the Fed might start cutting interest rates to ease business conditions and provide a further boost to the market.
Since the times are quite dynamic for the stock market, we decided to take a look at some top momentum stocks that hedge funds are buying. After all, even the smallest of news could spark a pop and the hedge funds will be there in the waiting to reap the profits. Some top momentum stocks are Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META).
A classic Ferrari sports car against a lush green hillside, symbolizing the company’s luxurious performance.
Our Methodology
To make our list of the best momentum stocks, we ranked the top 100 holdings of the iShares MSCI USA Momentum Factor ETF by the number of hedge funds that had bought the shares as of Q4 2023 end. Out of these, the top stocks were chosen.
For these top momentum stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
13 Best Momentum Stocks To Buy Now
13. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors In Q4 2023: 91
Broadcom Inc. (NASDAQ:AVGO) is one of the biggest semiconductor companies in the world. It designs chips such as modems that are used in smartphones. The shares are rated Buy on average but the average share price target is lower than the current share price.
During Q4 2023, 91 out of the 933 hedge funds profiled by Insider Monkey had held a stake in Broadcom Inc. (NASDAQ:AVGO). Ken Fisher’s Fisher Asset Management was the firm’s biggest investor due to its $2.3 billion stake.
Along with Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), Broadcom Inc. (NASDAQ:AVGO) is a top momentum stock according to hedge funds.
12. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Investors In Q4 2023: 91
ServiceNow, Inc. (NYSE:NOW) is a software technology company whose platform enables businesses to run analytics and conduct other business operations. It’s one of the strongest rated stocks on our list, since not only has ServiceNow, Inc. (NYSE:NOW) beaten analyst EPS estimates in all four of its latest quarters but the shares are also rated Strong Buy on average and the average analyst share price target is $847.55.
By the end of last year’s fourth quarter, 91 out of the 933 hedge funds part of Insider Monkey’s database were ServiceNow, Inc. (NYSE:NOW)’s shareholders. Ken Fisher’s Fisher Asset Management owned the biggest stake among these which was worth $1 billion.
11. General Electric Company (NYSE:GE)
Number of Hedge Fund Investors In Q4 2023: 92
General Electric Company (NYSE:GE) is an iconic American industrial products company headquartered in Boston, Massachusetts. It’s an important stock to watch out for this year, as General Electric Company (NYSE:GE)’s size has led the firm to streamline operations through divestment and a business division spinoff due in the coming months.
Insider Monkey dug through 910 hedge fund portfolios for their fourth quarter of 2023 shareholdings and found that 92 had held a stake in the company. General Electric Company (NYSE:GE)’s largest shareholder in our database is Chris Hohn’s TCI Fund Management due to its $5.3 billion investment.
10. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Investors In Q4 2023: 100
Oracle Corporation (NYSE:ORCL) is an American software company whose enterprise resource planning software is used all over the world. The firm scored a win in February 2024 when it revealed that the State of North Carolina is using its financial management platform.
As of December 2023 end, 100 out of the 933 hedge funds surveyed by Insider Monkey were the firm’s investors. The largest Oracle Corporation (NYSE:ORCL) shareholder in our database is Jean-Marie Eveillard’s First Eagle Investment Management as it owns $1.9 billion worth of shares.
9. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors In Q4 2023: 102
Eli Lilly and Company (NYSE:LLY) is one of the biggest pharmaceutical companies not only in the U.S. but also in the world. Even though its weight loss drug dominates the news cycle, February 2024 is turning out to be a bittersweet month for the firm after its Treasurer for 28 years is leaving the company.
During 2023’s December quarter, 102 out of the 933 hedge funds tracked by Insider Monkey were Eli Lilly and Company (NYSE:LLY)’s shareholders. Ken Fisher’s Fisher Asset Management was the biggest investor since it held $2.6 billion worth of shares.
8. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Investors In Q4 2023: 105
Adobe Inc. (NASDAQ:ADBE) is a productivity software company known for its reader and image editing software among other products. A key beneficiary of A.I. enabling its customers to improve their design processes, the shares are rated Strong Buy on average with an average share price target of $652.57.
Insider Monkey dug through 933 hedge fund holdings for last year’s December quarter and discovered 105 Adobe Inc. (NASDAQ:ADBE) shareholders. Ken Fisher’s Fisher Asset Management was the biggest investor since it held a $2.7 billion stake.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors In Q4 2023: 120
Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor designer headquartered in Santa Clara, California. The firm expanded its product portfolio in February 2024 when it revealed a new product that blends in embedded computing and the system on chip (SoC) model.
By the end of 2023’s fourth quarter, out of the 933 hedge funds surveyed by Insider Monkey, 120 had invested in the firm. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s largest hedge fund shareholder is Ken Fisher’s Fisher Asset Management as it owns 28 million shares that are worth $4.1 billion.
6. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Investors In Q4 2023: 129
Uber Technologies, Inc. (NYSE:UBER) is a software company that provides a platform to enable riders and drivers to collaborate with each other. 2024 is shaping up to be an important month for the firm as it could be forced to recognize some drivers as full time employees depending on their work.
129 out of the 933 hedge funds part of Insider Monkey’s Q4 2023 database had bought and owned the firm’s shares. Uber Technologies, Inc. (NYSE:UBER)’s largest hedge fund shareholder is D. E. Shaw’s D E Shaw through its $886 million investment.
Amazon.com, Inc. (NASDAQ:AMZN), Uber Technologies, Inc. (NYSE:UBER), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META) are some best momentum stocks.
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Disclosure: None. 13 Best Momentum Stocks To Buy Now is originally published on Insider Monkey.