Before jumping directly into momentum stocks worth buying now, it’s important to understand what momentum trading is.
As the name implies, momentum trading relies on reacting to the current movement of a stock or sector. A good screener from which to identify current momentum stocks can be found here. The theory then goes that momentum investors sell shares that are trending down and buy those that are trending up.
While the strategy flies in the face of the age-old adage to ‘buy low, sell high’, some research suggests it has merit.
AQR Capital Management is one of the more prominent proponents of the strategy. Ronen Israel, a principal at the firm, has defended the strategy at multiple high-level conferences providing evidence that the strategy has produced strong returns and tax efficiency similar to value investing.
|CLMT||Calumet Specialty Partners||$14.44|
Calumet Specialty Partners (CLMT)
Calumet Specialty Partners (NASDAQ:CLMT) stock represents a specialty hydrocarbon products company that has maintained positive momentum since early July. In that period, its share price has increased from blow $9 and is currently flirting with the $17 level.
The Indianapolis-based firm produces lubricating oils, waxes, solvents, and synthetic lubricants within its specialty products business. It also processes crude oil into gasoline, diesel, jet fuel, and asphalt.
Based on the target stock price, CLMT stock remains full of potential as that price averages $26.80 from the 6 analysts with coverage.
The company’s most recent earnings show that it is engaged in a rapid turnaround. In H1 Calumet Specialty Partners recorded a $110.8 million loss. That was a significant improvement over the $224.5 million loss during the same period a year prior making it one of the momentum stocks to watch. In Q2 the firms’ $15.3 million loss represented a massive improvement over the $78.4 million loss in Q2 ‘21.
Karuna Therapeutics (KRTX)
Karuna Therapeutics (NASDAQ:KRTX)is one of the momentum stocks to keep your eyes on for several reasons.
First of all, investors who take a look at its price chart will immediately notice that it doubled in price in the first few weeks of August. Second, Karuna Therapeutics is interesting because it operates in an emergent sector of healthcare that is garnering a lot of attention.
The reason KRTX stock doubled to begin August was that the firm undertook its initial public offering. Following the IPO, KRTX shares have plateaued at around $235. Interestingly though, they have $50 of upside based on target prices.
That upside is based on the fact that Karuna Therapeutics produces pharmaceuticals to treat schizophrenia and psychosis, especially within the Alzheimer’s population.
The company is essentially in its infancy and suffers from issues common to upstart pharmaceutical firms. Those issues include losses of $64.415 million in Q2 on $5.278 million in revenues. It’s a bet, but if the sector grows as some predict, the returns should be staggering.
Liquidia (NASDAQ:LQDA) stock represents another biopharma firm. Its momentum can be more accurately characterized as volatility. That volatility has seen LQDA stock bounce up and down multiple times this year.
However, there’s reason to believe that investing in LQDA stock is worth buying based on its ratings. 7 analysts currently cover the equity. The fact that six of those seven analysts rate it a ‘buy’ should provide some reassurance to hesitant investors. Equally importantly, they’ve collectively given LQDA stock an average target price of $13.29. That’s more than double its current price of $5.84.
The company undertook its IPO in April with share prices of $5.10. So, there’s arguably positive news in the fact that it is currently priced higher 6 months later.
The company’s numbers are much better than those of other pharmaceutical firms. It lost $9.45 million in the most recent quarter on $3.92 million in revenue.
Hudson Technologies (HDSN)
Hudson Technologies (NASDAQ:HDSN) is one of those momentum stocks that continues to head in the right direction.
The company is taking the traditional HVAC and refrigerant industry and making it greener. Hudson sells refrigerant services and products that reduce greenhouse emissions and serves a wide range of industrial partners.
In early August the firm reported another record quarter in which revenues reached $103.9 million. That figure represented a 72% increase over the $60.2 million of revenues the firm reported a year prior.
H1 was even better: Hudson Technologies reported revenues of $188.3 million, nearly doubling the $98.3 million recorded during H1 ‘21.
It should perhaps come as little surprise then that HDSN stock carries roughly 50% upside baked into its target price.
Lantheus Holdings (LNTH)
Lantheus Holdings (NASDAQ:LNTH) has trended up all year. In fact, it has appreciated in price by 170% in 2022.
By some traditional measures, including P/E ratio, LNTH stock is overpriced. That P/E ratio of 197 is worse than all but roughly 3% of the biotech/pharma industry.
That said, LNTH stock has roughly 25% upside baked into target share prices although its P/E ratio is sky-high.
There are a few reasons for this. The firm’s Q2 revenue reached $223.7 million, up 121% from the same period a year earlier. That led to a GAAP net income of $43.1 million in the quarter, a turnaround from its $26.7 million GAAP net loss a year before.
iRhythm Technologies (IRTC)
iRhythm Technologies (NASDAQ:IRTC) stock has expressed upward momentum throughout 2022 despite several sharp swings.
All in all, the heart rhythm monitoring technology firm has seen its shares increase in price from $116 to above $150 currently.
iRhythm Technologies biosensor technology is worn for up to 14 days and sends continuous data streams to the cloud to produce actionable insights for healthcare professionals.
The firm is performing well with Q2 results that include revenues that increased 25.6%, reaching $102.1 million. That strong quarterly performance led the firm to increase its full-year revenue guidance to between $415 to $420 million. IRTC stock looks to have roughly $20 of upside remaining.
Given that it has performed so well this year, there’s a chance it could surpass average expectations and reach closer to $200 as some analysts expect.
Veru (NASDAQ:VERU) is a pharmaceutical firm that develops a few classes of therapeutics. It develops oncology drugs for treating breast and prostate cancer. It also develops drugs for use in the treatment of Covid-19 and other respiratory diseases.
VERU stock is admittedly among the riskier stocks on this list. Its share price has increased from $4 to $14 this year. That’s a positive. And its average target price of $35.20 implies there’s plenty of reason for investors to remain positive.
That said, revenues decreased 46% when Veru last reported earnings in early August. That sent share prices tumbling. They’ve since leveled off and the stock’s future movement is very much dependent on resurgent Covid-19 cases.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.