Investors are always on the lookout for stocks that rise fast, with fast-growing profits. Accordingly, momentum stocks with lower-risk characteristics ought to be considered.
Of course, not all stocks offer this kind of potential. Momentum stocks tend to be higher-risk, given the fact that momentum can work in both directions. However, companies with long-term catalysts supporting their potential could outperform. I tend to look at companies with strong balance sheets, strong earnings, and analyst upgrades.
Of course, many momentum stocks have been driven higher by catalysts that may not be so sustainable over the long-term. Hype around the AI sector is one such area that’s been painted as potentially overblown.
I, however, believe that certain stocks could see long-term growth from such secular tailwinds. Here are three top momentum stocks that can make you the millionaire next door.
At the top of my millionaire momentum stock picks is a popular fast-food chain and my personal favorite, McDonald’s (NYSE:MCD). A solid business with many loyal customers, the company has stayed consistent despite a pandemic, inflation, and market rout. Even in tough times, people choose McDonald’s for its affordable food options when dining out.
McDonald’s has recently achieved impressive success, with its stock reaching all-time highs. It hit an all-time high of $298 recently, putting the stock up 21% over the past year. It was trading at $261 in March, and has been steadily moving higher since then.
The company’s recession-resistant business has seen comparable sales increase by about 13% in the recent quarter. Adjusted earnings per share also increased by 15% to $2.63. Consumers have been reducing expenses and cutting on luxury meals due to inflation, but McDonald’s is delivering value even during market uncertainty. The company’s management team aims to open 1,900 new stores this year to add to its already established 40,000 locations across the world. Its fully-franchised operating model is a proven success in the restaurant industry.
With McDonald’s, investors not only enjoy growth momentum but also steady dividends. The company pays out about 60% of its earnings to shareholders via dividends. Thus, as profits rise over time, so too do the company’s distributions. McDonald’s recently announced a dividend of $1.52, keeping its 46-year streak of dividend increases alive. Currently, investors enjoy a dividend yield of 2.1%.
Despite recession fears, the company is poised for steady growth, and maintains a strong financial position while pursuing expansion plans.
Next up is the tech dinosaur, Microsoft (NASDAQ:MSFT). When it comes to picking momentum stocks, one cannot miss out on MSFT stock. The stock is up more than 23% over the past year, crossing the $300 level in April. Since then, this stock has been steadily rising.
We may not see any big projects from Microsoft anytime soon, but it is one stock that you can buy and hold for the long term. There is a reason it is one of the best momentum stocks for millionaires.
The stock is trading at a premium because of the tech giant’s strength as a long-term investment. The one reason to invest in the company is its solid diversified business. Microsoft provides the software that helps businesses handle operations with ease, and its cloud segment is growing at a rapid pace. I expect Microsoft to show strong numbers in its cloud segment in its coming quarterly report.
In Microsoft’s recent quarterly results, the company reported a revenue of $52.86 billion. This represented a 7% rise year-over-year. Earnings per share also rose 9% year-over- year to $2.45 per share. Notably, the company’s cloud business saw a 16% revenue surge, hitting $22.08 billion. That said, Microsoft is making news for its recent investments in AI. The company has invested a total of $13 billion in OpenAI, putting the company in the center of the discussion around artificial intelligence and how AI will bring about the future. Microsoft is one company that is set to benefit from the AI boom.
MSFT stock might look expensive today, but it is a great long-term investment. The company’s core businesses, and its exposure to AI, will generate solid returns over the next few years. Additionally, the company provides a dividend yield of 0.85% and recently paid a dividend of $0.68. The dividend is consistent and that also makes it one of the best dividend stocks to own.
Another tech giant, Nvidia (NASDAQ:NVDA) has always been among my favorite momentum stocks to buy. I’ve always recommended this stock, for many reasons. However, the company’s ties to AI are undoubtedly the key reason most investors hold this stock.
Nvidia is certainly making the most of AI and looks unstoppable at the current stage. Additionally, the company is generating solid revenue from its cloud computing segment. Nvidia’s chips are used for AI applications and the demand for the company’s chips is on the rise. NVDA stock is up over 100% year to date and has gone from $143 in Jan to $307 today. This is one of the best momentum stocks to buy.
The AI market is massive, meaning the potential opportunity for Nvidia is huge. It is expected that the market will grow 20-fold by the end of this decade. This means Nvidia will enjoy an early-mover advantage in a high-growth area of this market. I’d recommended the stock earlier when it was trading at $288 and it is up to $311 now. With Nvidia, you get what you pay for.
Keybanc has raised the price target of the stock to $375 and I believe the company has the potential to reach its target, easily. Oppenheimer also has a buy rating on the stock, and a price target of $350 per share. The company is at the right place at the right time and is doing its best to make the most of the momentum around AI.
On the date of publication, Vandita Jadeja 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.