Momentum investing is quite different from many of the strategies typically employed by long-term investors. In momentum trading, the goal isn't to buy a stock at an attractive valuation but to buy stocks that have already considerably gone up to take advantage of the "momentum" in their business -- and in their stock price.
Investors should be aware that there is no single definition of momentum investing. This is especially true when it comes to time periods. For example, short-term traders often define a stock's momentum as its price change over the past 10 days. Momentum traders tend to pay attention to data such as trading volume and like to use technical indicators like moving averages to assess where a stock might go in the short term and guide their strategy.
Generally, they look for stocks that are trading above their moving averages as a sign that they will continue moving higher. Alternatively, short-sellers look to capitalize on a stock that's on a downward trend. Momentum investing can also be a popular strategy among professional investors such as hedge funds.
Five momentum stocks
Five great momentum stocks to put on your radar
Now that the S&P 500 is in a bull market once again and the S&P, Dow Jones Industrial Average, and Nasdaq have all reached new highs recently, it could be an exciting time to be a momentum investor. While there's no way to time the market or know what stocks will gain momentum at any given time, there are some interesting opportunities for patient momentum stock investors.
Keep reading to see five momentum stocks that have already delivered strong results for investors and could continue to outperform.
Momentum Trading
Nvidia
1. Nvidia
Nvidia (NVDA 0.28%) is perhaps the most notable momentum stock in the market as of January 2025. Not only did it deliver a 168% gain for investors over the past year alone, but the stock has gained more than 2,200% over the past five years. It is a massive company with an almost $4 trillion market cap.
It isn't hard to see why Nvidia has performed so well. It is (by far) the leading maker of graphics processing units (GPUs), which are instrumental in many applications of artificial intelligence (AI) technology, especially on the data center side of the business. The surge in AI investment has trickled down to businesses in all industries and of all sizes, and Nvidia is a clear beneficiary.
In the latest quarter, Nvidia's revenue grew by 94% year over year, and in the 2024 fiscal year, net income was almost seven times what it was in 2021 (when the business was already very large and impressive). The company has enormous financial flexibility to continue to invest in growth and innovation, and with the rapid evolution of AI and other GPU-dependent technologies, Nvidia could potentially outperform the market for years to come.
Meta Platforms
2. Meta Platforms
Meta Platforms (META -0.59%) is best known for its Facebook social media platform, but it is also the parent company of Instagram and metaverse technology business Reality Labs. Year to date, Meta Platforms has been one of the best-performing mega-cap stocks, gaining about 70% in 2024.
Meta's social media platforms have about 3 billion monthly active users worldwide and have a massive presence in the digital advertising industry, where the company makes most of its money. It has a dominant 75% share of social network ad spending and roughly one-fifth of all digital ad spending in the United States. Plus, the business has been (successfully) leveraging AI technology to improve engagement and content personalization.
In the most recent quarter, Meta's operating income grew by 26% year over year, thanks to revenue growth and margin expansion. The business generated $52 billion in free cash flow over the past year, giving it plenty of financial flexibility to return capital to shareholders or pursue attractive opportunities as they arise.
Robinhood
3. Robinhood
It wasn't too long ago that investors started to lose faith in Robinhood (HOOD 1.71%) after trust issues with the platform developed among retail investors during the meme stock frenzy. However, the company has done an excellent job of moving forward, and investors were the beneficiaries of a 37% gain in 2024.
Robinhood is best known for its innovative no-fee brokerage approach, which can be credited with ultimately causing the entire online brokerage industry to drop commissions on stock trades. Today, Robinhood offers free stock, options, and cryptocurrency trading, and has done a great job of moving beyond its trader-focused or "gamification" reputation with features like individual retirement accounts, debit and credit cards, and a high yield on cash balances. The Robinhood Gold subscription product also packs a lot of value for $5 per month and is becoming a big revenue driver with massive potential.
Kinsale Capital Group
4. Kinsale Capital Group
Kinsale Capital Group (NASDAQ:KNSL) isn't a household name, but after reading about the momentum in its business, you might want to put it on your radar.
If you aren't familiar with its business, Kinsale is an insurance company. Instead of providing coverage for everyday Americans, however, the company specializes in the unusual. Kinsale is a specialty insurer, focusing on property and casualty insurance for high-risk businesses and situations where it's difficult to accurately estimate risk of loss. For example, many traditional liability insurers wouldn't provide coverage for a demolition business; Kinsale would.
One big takeaway is that specialty insurance can be highly profitable for companies that are as good at it as Kinsale. Its underwriting margin has averaged almost 20% over the past three years (most insurers are happy if this metric is in the low single digits). Kinsale is the only publicly traded pure play on specialty insurance and has lots of room to grow. This is a highly fragmented industry, and Kinsale makes up a little more than 1% of the market today.
Kinsale delivered a roughly 40% gain in 2024, but its momentum has essentially been going strong since its 2016 initial public offering (IPO). In all, it has delivered a 2,270% total return (more than 40% annualized) due to its incredible profitability and strong growth. In fact, in its worst year since going public, Kinsale still managed a 10% gain for investors.
Sea Limited
5. Sea Limited
Southeast Asia-based Sea Limited (SE -1.97%) pulled a lot of growth forward during the COVID-19 pandemic. Business then slowed considerably, causing the stock to retreat from its all-time highs before it found momentum again, with a 162% gain in 2024.
Sea has three different business lines. It has a gaming platform (Garena), an e-commerce platform (Shopee), and a digital payments platform (SeaMoney). You'll find the most momentum with Shopee and SeaMoney. In the most recent quarter, SeaMoney's e-commerce revenue grew by 43% year over year, and financial services revenue increased 38%. Shopee saw 27% more orders in the third quarter of 2024 than in the same period in 2023, and despite the rapid growth in SeaMoney, loan quality actually improved.
SeaMoney has $9.9 billion in cash and equivalents on its balance sheet, giving it plenty of financial flexibility to invest in its business as it sees fit. If it can continue to grow its e-commerce and financial services businesses, the stock's momentum could last for a long time.
Related investing topics
Bottom line
Momentum stocks can be a good investment
Past performance is not a guarantee of future returns, but it is often a good indicator of positive trends in a business, which can certainly lead to superior returns over time. Plus, bull markets can be a great opportunity to take advantage of strong momentum in excellent, well-run businesses. If you’re looking for stocks that can thrive in the new bull market, this list represents a good starting point.
FAQs
Momentum stocks FAQs
What are the top momentum stocks?
The top momentum stocks are those that have recently outperformed the S&P 500 and have excellent fundamentals in their underlying businesses. Strong growth, improving profitability, and an expanding market opportunity are just a few examples of factors to consider.
How do I find momentum stocks?
The first step to finding momentum stocks is to screen for companies that have recently outperformed the S&P 500 by a significant margin. Then, take a closer look at each stock to figure out why they have performed so well, and whether there's still upside potential if the company continues to execute on its strategy.
Is momentum investing good?
Momentum investing can be a great way to identify opportunities, but like any other investment strategy, it isn't perfect. Just because a stock has recently outperformed the market doesn't mean it will continue to do so. That's why it's important to not only buy stocks with recent momentum, but also those with durable competitive advantages and massive market opportunities, so they make excellent long-term investments as well.
