It’s the conundrum every investor — and every momentum investor –must face. When a stock is on a tear, do you jump in?
Isn’t there a higher degree of risk to buy into a stock that has been performing particularly well as of late? How do you know if you will be the victim of a reverse in momentum? I certainly have enough bad memories of the dot-com bubble bursting and watching certain stocks go almost to zero.
The key with this approach is to recognize whether the stock is going higher because the market finally realized it was undervalued and is paying catch-up, if the story continues to improve such that earnings continue to grow, or if the price has outstripped any sense of rationality purely due to momentum trading.
Here are three stocks I think have room to run, even after their strong moves, because of business fundamentals.