This year, some of the best momentum stocks have provided triple-digit returns, mainly in the AI sector. While I believe this is a great sector to focus on, many AI momentum stocks are overvalued, so looking elsewhere for better value is a great idea. Accordingly, I’ve shifted my focus in this momentum column toward other growth companies in lesser-known sectors.
This article will look at seven momentum stocks that I expect to gain much more from their current prices over the medium-term. The market has been selling off in recent trading days. However, these companies listed below each have solid margins of safety, making them excellent ways to play a return to a risk-on environment in equities.
Let’s dive in!
Koninklijke Philips (PHG)
Koninklijke Philips (NYSE:PHG) is one of the most well-known companies worldwide. That’s particularly a result of the company’s electronics lineup, even though the company has shifted away from that segment in recent decades.
Unfortunately, Philips’ strategic refocusing on its healthcare segment hasn’t aided the company’s growth. Additionally, its financials have been doused in red ink for as long as I can remember. Indeed, the selloff in 2021 was the nail in the coffin for most investors, as the stock plunged almost 80% from its peak to trough.
However, there seems to be light at the end of the tunnel. PHG stock has been on a recovery rally since Nov. 2022, and analysts anticipate roughly 5% sales growth annually over the next five years. In addition, the company’s earnings per share are expected to climb by 21% this year and 23% next year. Thus, this might be a good time to get in before the stock appreciates more.
Over the long run, I believe there is substantial upside potential for this healthcare giant, as it leverages its strong brand recognition, diversified portfolio, and innovation capabilities.
MercadoLibre (NASDAQ:MELI) is a Latin American fintech and e-commerce player that is up almost 65% year-to-date. Its performance has stood out from its peers in the sector due to consistently higher growth in its core markets. Indeed, the company’s focus on under-banked markets in Latin America has provided some breakneck growth which I think can continue for some time.
Notably, key investors and analysts anticipate MercadoLibre’s top- and bottom-lines to grow at a blistering rate this decade. If expectations are met, the company’s earning per share will expand 12x over the next decade, with revenue increasing more than five-fold.
Of course, while there is massive potential here, I would point out that there are some risks in the Latin American markets. These risks primarily stem from political and economic stability.
However, I think these risks are outweighed by the opportunities that MercadoLibre has to tap into a large and growing consumer base that is increasingly adopting online shopping and digital payments. MercadoLibre has a dominant position in its core markets of Brazil, Argentina, and Mexico, and is expanding into other regions such as Colombia, Chile, and Peru. Thus, I take these growth projections at face value, and expect substantial price appreciation from here.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) is a leading industrial gas supplier that serves various industries such as chemicals, energy, healthcare, metals, and electronics. It also has its hands in up-and-coming sectors like hydrogen energy, which is expected to play a key role in the global energy transition. The company is investing heavily in hydrogen projects around the world, such as Saudi Arabia’s NEOM city South Korea’s hydrogen economy, and Europe’s green hydrogen network.
While APD stock might have not done the best in terms of year-to-date performance, it’s still a great momentum play. The company has delivered strong earnings growth for the past two quarters, beating analysts’ estimates each time. The company also pays a regular dividend that yields 2.4% to sweeten the deal for income-focused investors.
It might not be the flashiest pick, but APD stock is well-positioned to pay off in the long run. Analysts expect the company’s revenue growth to accelerate to 21.5% annually until 2026 before slowing down, while its earnings per share are projected to grow well above double-digits through 2028.
e.l.f. Beauty (ELF)
This stock has provided tremendous returns, so I don’t think it would be just to ignore it. Of course, I often stay away from stocks that have appreciated a lot, and I would not downplay the fact that there is downside risk here if the broader market turns bearish again. Still, over the past year, e.l.f. Beauty (NYSE:ELF) has surged 252%, and 560% from its trough last year.
This sort of appreciation in a non-speculative industry like beauty is something to praise. Elf’s financials have been especially stellar. While analysts do expect growth to slow down next year, they also expect it to re-accelerate sharply in fiscal 2026.
In my opinion, what makes Elf really stand out from its peers is its strong social media presence. The company has leveraged platforms like TikTok and YouTube to create viral marketing campaigns and engage with its customers. It has also partnered with celebrities and influencers to expand its reach and appeal. Moreover, Elf has been on the forefront of innovation when it comes to beauty products and services. Thus, I think the company has what it takes to cater to the changing preferences and needs of its target market. For instance, it has launched a skincare line, a subscription service, and a virtual try-on feature on its website.
Regardless, the momentum with ELF stock is unlikely to continue forever. I do not expect ELF to soar above $150 anytime soon, but it’s a momentum stock to buy on any face-ripping rallies.
Marriott International (MAR)
The recent post-pandemic travel boom has defied all expectations, and two big winners are hotels and casinos. Marriott International (NASDAQ:MAR) recently shot past $200 per share with strong momentum after its earnings surprise last week, riding this catalyst higher.
Obviously, the revival of MAR stock is not just due to the travel recovery. The company’s financials are strong, and analysts remain bullish in this regard. Consensus estimates call for earnings to grow at a double-digit rate annually over this decade. Thus, I see the stock’s current price-earnings ratio as justified.
Notably, Marriott is also pursuing strategic growth initiatives that will enhance its long-term prospects. For example, it is expanding its presence in high-growth markets like China, India, and Southeast Asia, while developing new concepts like home rentals, all-inclusive resorts, and wellness retreats.
Still, there are mixed feelings with this travel play. As with many momentum stocks in this environment, MAR stock provides somewhat meager upside potential if analysts are correct, and signifiant downside risk if the economy starts to slump. That said, I think if momentum picks up in the travel sector, this is the way to play it.
This might not be Wall Street’s favorite stock recently, but I think it’s certainly heading that way in the long-run. Intel (NASDAQ:INTC) has been heavily investing in high-growth sectors like AI chips, cloud, and quantum computing and has dipped its toes in the dedicated graphics card market, doubling its market share in just one quarter. Of course, these products are far from perfect and aren’t the most cutting-edge. But this is definitely not the Intel Wall Street kept selling over the past two years. On a year-to-date basis, INTC stock is up 32%, as the company has even managed to turn the tide in its personal computing segment.
Intel’s new CEO Pat Gelsinger has been instrumental in reviving the company’s fortunes. He has announced a bold plan to invest $20 billion in building and creating a new business unit called Intel Foundry Services that will offer chip manufacturing services to other companies. He has also pledged to regain Intel’s leadership position in chip technology by 2025 and deliver chips with 2-nanometer process nodes by 2027.
I think these moves show that Intel is serious about addressing its challenges and seizing new opportunities in the semiconductor industry. Perhaps it won’t be able to meet these promises on time, but it is undeniable that Intel has changed for the better. For now, the company still has a lot of work to do to catch up with its rivals AMD (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA). That said, Intel clearly has the resources, talent, and vision to do so. Thus, I think it is a great buy for long-term investors who are looking for momentum plays in the chips sector.
Nike (NYSE:NKE) has been marred by controversy in recent years, but it would be unfair to exclude this well-established high-growth business in a list of momentum stocks to buy. Sure, its performance hasn’t been the best since 2021. However, NKE stock has bounced back from its 2022 trough and seems to be at an inflection point.
I certainly see NKE stock going higher from here since it is only up around 14% from its pre-pandemic price. It also trades at a forward price-earnings ratio below 30-times, with sales growth projections comfortably above ~7% annually through 2033. The company’s earnings per share growth is also expected to come in at the double-digit range over this time frame. I think that’s likely to continue for the foreseeable future.
Indeed, buying this well-established brand seems like a no-brainer move right now. But again, I’m not surprised by the negative sentiment surrounding this company, due to various controversies the company continues to battle.
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.