5 Hot Stocks Getting Their Momentum Back

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The hot stocks of last year have mostly fallen by the wayside, as the go-go rally of 2013 has given way to volatility in the new year. From biotechs to 3D printers, some of the hottest momentum stocks have lost their mojo.

momentum stocks tsla cmg amzn gmcr fslrBut since the pullback at the end of January and more recently since a mid-April dip, the stock market has stubbornly chugged higher. The major indices are setting new highs, and many big names have snapped back, too.

The hot stocks that were momentum darlings of last year are also in this camp. And if you’re looking to get back in the saddle with some of the fast-moving picks of the last several months, now may be a good time.

Here are five hot momentum stocks that are getting their groove back and could move even higher:

Momentum Stocks: Tesla (TSLA)

momentum stocks tsla cmg amzn gmcr fslrI am admittedly a bit of a Tesla (TSLA) skeptic, partially because of doubts around its Gigafactory for electric vehicle batteries and partially because of a disappointing earnings report several weeks back.

However, short-term momentum is undoubtedly on Tesla’s side. The stock is up 53% year-to-date, and up more than 20% from its low point after earnings.

This kind of momentum proves that investors are believers in the stock — and as we’ve seen before, it doesn’t pay to fight the tailwind in TSLA stock by taking the other side of the trade. As I’ve written before (here and here), sentiment is the biggest driver of this company, and those who read too much into headlines are missing the short-term opportunity.

Furthermore, short interest in Tesla hit its lowest levels in May since October of 2013 — proving that fewer bears are sticking around to play the downside on this trade.

That could mean less chance of a short squeeze, but clearly there is enough buying pressure to result in quick moves higher for TSLA stock. I’d have confidence buying Tesla stock under $235 with a short-term target of around $270.

Momentum Stocks: Chipotle (CMG)

momentum stocks tsla cmg amzn gmcr fslrThere’s a lot of talk about food price inflation these days, and that’s putting the pressure on margins for many restaurants. But even more pricey meat and vegetables can’t hold back the big-time growth story of Chipotle (CMG), and this momentum stock has gotten its groove back after some recent troubles.

Shares are up 11% year-to-date, including a run of about 20% from April lows after the company reported disappointing earnings and saw shares drop sharply as a result. The reason for the selloff was a miss on profits; however, investors slowly caught on to the fact that CMG is still in great shape. The company posted a massive 13.4% increase in same store-sales and plans to open 180 to 195 new locations in 2014!

Besides, don’t worry about rising food prices, because Chipotle has announced incremental price increases of its own to offset these rising costs.

There are few places to find growth right now, and Chipotle is clearly one of them. After the short-term dip based on disappointing earnings, it was clearly a buying opportunity — but even now there are still some short-term profits to be had in this stock as momentum continues to build.

I like Chipotle at $590 or less.

Momentum Stocks: Keurig Green Mountain (GMCR)

momentum stocks tsla cmg amzn gmcr fslrKeurig Green Mountain (GMCR) broke plenty of hearts in 2011 as it crashed and burned from over $100 per share to less than $20 per share in about a year.

But the maker of Keurig single-cup coffee brewing systems has made back all that lost ground and then some, pushing past $120 per share. GMCR stock is sitting on 65% gains in 2014, thus far.

The reason is that, while some investors wrote Green Mountain off as a one-trick pony, the company has reinvented itself with shrewd business deals. One such deal includes a plan to put commercial-grade Keurig machines in Subway restaurants across North America — a mainline into big sales both of the devices as well as a steady stream of income from its coffee pods once they are installed.

The company gapped up in May after strong earnings, and short interest continues to fall as the bears give up the chase on Keurig Green Mountain.

The momentum may not last in the long term, as a historical look at GMCR painfully proves, but I think there is still serious upside based on recent moves. I’d buy Keurig Green Mountain under $125, but make sure you protect yourself with a 10% stop loss, as this pick can be volatile.

Momentum Stocks: Amazon (AMZN)

momentum stocks tsla cmg amzn gmcr fslrIt’s hard to bet against Jeff Bezos and Amazon (AMZN), but that’s exactly what investors have been doing in 2014. AMZN stock is off about 17% since January 1, as Wall Street has lost patience with the e-commerce giant and want to see profits as well as revenue growth.

But the lack of pandering from Bezos could ultimately be the best thing for investors in the long run, since the iconic CEO has forged ahead with big investments into fulfillment centers and new devices like the Fire TV and the long-awaited Amazon Fire smartphone.

And as I said in a recent TV appearance, Amazon is a marvel of automation and 21st century commerce. It’s not unrealistic to think of a future 10 years from now where an Amazon customer clicks “buy,” a robot picks items off the warehouse shelves and automated drones deliver the item to your doorstep. This kind of high-tech efficiency keeps costs down for consumers and could result in better margins for AMZN down the road.

This clearly isn’t a swing trade like the others on this list. But I think that, in the long-term, investors are going to wake up to the sheer power of AMZN once more, and then it’s off to the races.

If you have the patience, I would definitely buy Amazon on this dip right now. The stock is still under the radar, but it has stabilized and quietly added a double-digit gain in the last month or so.

Momentum Stocks: First Solar (FSLR)

momentum stocks tsla cmg amzn gmcr fslrSolar stocks are one of the quintessential momentum plays out there, ripe with volatility and a long history of making investors a lot of money right before taking them to the cleaners.

And while traders should certainly tread lightly and use stops, I’d have confidence buying picks in the sector right now with hopes of continued upwards momentum — including an investment in flagship First Solar (FSLR) at any price under $70 per share.

There are a lot of favorable headlines lately for the solar sector, including President Obama’s much-publicized war on King Coal and the continued drumbeat of new solar projects now that solar technology is comparatively affordable thanks to cheaper costs for the equipment and oil prices now exceeding $100 per barrel.

FSLR stock is up 25% year-to-date, and while it still only trades at half of its 2011 levels, I think its reasonable to expect First solar to move another 25% higher by the end of the year. The 52-week high on the stock is about $75, and after FSLR pushes through that mark, it will have serious momentum at its back to carry it into the fall.

Remember, solar stocks are always volatile so you should protect yourself with stop losses. But have confidence in the medium — the long-term prospects of alternative energy in general and First Solar in particular.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP


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