As the market maxim goes, velocity stocks on the run usually maintain momentum. But investors need to weigh the risks carefully. Many retail traders got burned jumping into a penny stock pump-and-dump at the high before selling low. It’s a tale as old as time, and we don’t have to look further than the past years’ GameStop (NYSE:GME) mania for innumerable examples.
When assessing high-flying velocity stock viability, investors need to look backward to assess the trend while considering long-term potential. While day trading opportunities abound, investors interested in maintaining a long-term position in today’s velocity stocks must balance past performance with viable prospects. These companies all showed tremendous growth this year, but couple that velocity with solid prospects.
Onto Innovation (ONTO)
Hardware company Onto Innovation (NYSE:ONTO) is riding high on the artificial intelligence wave, but its year-to-date 87% increase is just the beginning. Last month, the company announced a $100 million deal for its Dragonfly inspection system. The hardware is critical in measuring flaws or defects in third-party semiconductors, a crucial operational risk for companies like Nvidia (NASDAQ:NVDA). Onto’s entrenched position in the semiconductor supply chain makes it a vital player in the tech industry.
Onto services, a range of customers as chips become an integral part of most electronic systems.
Increased demand for artificial intelligence is pushing the existing GPU and tech stack market from $3.16 billion today to $25.5 billion by 2030. As companies compete to come out on top in the new tech race, Onto is best positioned to capitalize on the trend – no matter who wins.
Clean Harbors Inc (CLH)
Clean Harbors Inc (NYSE:CLH) is up 46% since January, but a recent slump in its velocity might mean it’s time to buy the dip. In the past four quarters, Clean Harbors beat analyst expectations by an average of 27%. That’s a strong performance, but particularly notable in a new (and capital-intensive) field as commercial environmental cleanup operations.
Clean Harbors is well-known for its role in post-9/11 cleanup and managing the 2010 Deepwater Horizon oil spill. But that was just the beginning, and the company’s future is bright as founder Alan McKim repositions himself as the company’s technology chief. His pivot to a focus on technology and software management to optimize operations represents new vistas for Clean Harbors and new growth opportunities.
For technical analysis enthusiasts, you’ll be excited to see Clean Harbors’ stock forming a classic hammer chart pattern. This can indicate a pricing bottom before an upside move. That means the dip-buying opportunity might soon end for this velocity stock.
SharkNinja (NYSE:SN) is a relative newcomer to today’s market. The consumer discretionary company was listed at the end of July after spinning off from its parent company. In that time, though, SharkNinja stock showed runaway velocity.
The stock slumped soon after listing, dropping 40% just days after going public. That dip was short-lived, though, and SharkNinja rallied by the beginning of September. But that was only the beginning. This week, SharkNinja got its first official Wall Street rating: a solid Buy from investment banking firm Jefferies. SharkNinja jumped on the news, climbing 25% within days. But, since Jefferies pinned a $67 price target on the velocity stock, there’s still as much as 60% upside on the table.
SharkNinja’s performance, including a consistent 20% annual sales increase since 2008, underlines its core strength. SharkNinja’s products, including hair dryers and ice cream makers, are on the lower end of luxury products. The fact that SharkNinja is keeping sales high in a down economy bodes well for its long-term potential.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.