It’s been a rather anxiety-induced past few sessions for investors who chase the monstrous momentum stocks that recently went a bit parabolic. Indeed, parabolic moves don’t tend to be sustainable. Though some such moves may be, especially in the face of a profound technological or industrial revolution. Those who buy stocks based solely on the stock chart must be ready for choppy waters.
Momentum stocks tend to take the escalator up, but the elevator down. And when it comes to parabolic movers, that elevator’s cable could snap without a moment’s notice.
The big question is, what is the best course of action when volatility makes its dreaded return to Wall Street? Some will run in a panic, never to come back to a crowded trade, whereas others will get greedy and start really buying.
As recent parabolic movers face volatility, dip-buyers may finally have a chance to pounce. Here are three momentum stocks to watch as momentum reverses in late June.
Costco (COST)
Perhaps the only thing more crowded than a suburban Costco (NASDAQ:COST) on a Sunday afternoon is COST stock itself. Shares of the discount retailer are on a parabolic trajectory that’s little phased by recent volatility in the tech sector.
Indeed, Costco isn’t a tech company, and it’s not one that’s at the forefront of AI research. Still, the stock’s gains have really picked up in the past year. Especially as consumers continue shopping at Costco for the latest and greatest deals.
Costco seems to be the brand that’s gained the most in terms of loyalty and strength in the past four years. The retailer was there for consumers when they needed to stock up on toilet paper during the pandemic. Then, with affordable groceries and other perks for consumers amid inflation.
These few years have been pivotal for Costco, as it is furthering its relationship with members. Given this, I’d say COST stock is worth a bigger premium and that it’s less of a surprise that the recent parabolic move is relatively unshaken.
Nvidia (NVDA)
All it took was three days for AI chip darling Nvidia (NASDAQ:NVDA) to fall into a nasty correction that wiped out nearly 16% of its value. It’s a steep drop that may yet have concluded but one that should probably invoke greed rather than fear, especially for believers that the AI boom is nowhere near curtains.
Over the coming week, you’ll likely hear some bears compare the current state of AI stocks to the dot-com bust.
It’s easy to dub AI stocks as bubbly now that NVDA stock has already been corrected. However, it’s pretty hard to buy in the face of fear, even if others around you are convinced this is the end.
Sure, Nvidia had a good run. It did become the largest company on Earth for a brief period of time. But I find it hard to believe that the stock is in the early innings of an irrecoverable crash. Not when CEO Jensen Huang is playing the long game, thinking as far out as 2026 with its Rubin chip architecture, while the stock is trading at a somewhat reasonable 69 times trailing price-to-earnings ratio (P/E).
Walmart (WMT)
Walmart (NYSE:WMT) has been helping consumers save big money in recent quarters. Big savings amid inflation have resulted in huge crowds over at the local Walmart. Undoubtedly, Walmart is like Costco for those who’d rather not pay for a membership.
Costco members may insist that Walmart still doesn’t live up to Costco in terms of quality. To get higher quality, though, you’ll have to pay the price of admission into a Costco shop. For many, that’s just not a reasonable ask when inflation cuts deep into the finances.
In any case, I do think the recent parabolic move in WMT stock is remarkable. The stock now goes for 29.6 times trailing P/E, which is quite hefty by Walmart standards.
Gone are the days when Walmart was a boring, oversized retailing laggard. The company is resonating with customers in a big way. And, I don’t think Walmart shoppers will be “trading up” to fancier retailers once their economic circumstances improve. The power of low prices will prevail.
Simply put, Walmart is having its way with its much-smaller rivals. And it’ll probably continue to have its way.
On the date of publication, Joey Frenette did not hold (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.
