Momentum stocks have been all the talk lately, as the AI rally is yet to see a substantial cooldown. Wall Street has been pouring in unreasonably high price targets for such stocks, which has driven the valuation to excessive levels. It is safe to say that chasing the hottest momentum stocks is simply not worth it right now. They present tremendous downside risk, have little upside potential left, and their businesses are priced for perfection.
In contrast, some stocks have just started to gain momentum. Snapping up these momentum stocks at a cusp of a turnaround from their trough will leave you with little downside risk and much higher upside potential. Let’s look at three today:
Intel (INTC)
Intel (NASDAQ:INTC) is starting to come under the spotlight again after the company has begun to aggressively invest in high-growth areas and catch up with its competitors. The most notable sector here is AI, and Intel chips are starting to enter the competition with Nvidia (NASDAQ:NVDA). Intel believes it can “beat Nvidia’s top-of-the-line H100 GPU by this fall.”
That’s an impressive claim. The company was seen as a sluggard just two years ago, losing the CPU business to Advanced Micro Devices (NASDAQ:AMD) and failing to capitalize on the post-Covid-19 boom. However, Intel is no longer resting on its laurels and is working hard to make a comeback. This doesn’t just include the AI sector. Intel remains ahead in the CPU sector and has stabilized its market share loss to AMD. I believe the company can pull ahead here if it keeps up with the competitive prices. Plus, let’s not even get started on Intel’s foray into the discrete GPU market recently. These graphics cards don’t have the best drivers but are arguably the most competitive regarding raw specs. It doubled its GPU market share in Q1.
It is up 36% from its trough back in March and has what it takes to keep trending higher.
Bancolombia (CIB)
Bancolombia (NYSE:CIB) is a Colombian financial company that mostly does business in Northern South America and Central America. It has solid top-line and bottom-line metrics, with a 3-year revenue growth rate of 15.5% and 3-year EPS without Non-Reoccurring Items growth of over 29%. Both of these numbers are better than ~85% of companies in the banking industry.
However, seeing the company trading at a measly forward earnings multiple of 5 times might surprise some. This is because Bancolombia is based in Colombia and many other countries that frequently go through political turmoil and protests. This instability keeps investors at bay, but such a multiple has already priced in that caveat and some more.
While I don’t want to downplay the political risks, I would still note that Colombia’s latest round of significant protests was back in 2021. You will always have mild protests in every country, which don’t impact the banking business. This stock is up 27% since June as more investors realize the potential here. Still, much value is left untapped since Gurufocus puts a $40 fair value tag by next year. It also has a forward dividend yield of 10.3%.
Sun Country Airlines (SNCY)
Diversifying this list more, Sun Country Airlines (NASDAQ:SNCY) is another great pick. As the pandemic faded away and people returned to traveling, this airline has been posting explosive growth. But unlike most other airline businesses, this growth hasn’t cooled down too much. Top-line growth has been sustained near 30% for the past three quarters. This will slow down, but analysts believe the company will post 29% year-over-year revenue growth for 2023 and 11% next year, followed by another re-acceleration to 16% for 2025. Additionally, EPS is also expected to increase by 60% from $1.86 in 2023 to almost $3 in 2025.
In exchange for all that growth, investors would pay 12 times forward earnings per stock. That’s great value, and SNCY has positive momentum, too, with a 40% appreciation YTD.
On the date of publication, Omor Ibne Ehsan 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.
