Occasionally, hot stocks can get that much hotter in a move that can only be described as a “melt-up.” Such extreme share price action can be like the reverse of a stock meltdown, whereby a stock crashes rapidly, like in late February 2020.
Indeed, stock melt-ups and meltdowns tend to catch many off-guard. And while such moves may be rapid to reverse, investors shouldn’t be inclined to overreact either way. The great Nvidia (NASDAQ:NVDA) stock melt-up of 2022-24 is a prime example of why it’s a terrible idea to go against the grain with a short position on some of the market’s fastest-moving melt-up names.
Of course, not every high-momentum play can be an Nvidia. However, I think it’s worthwhile to keep tabs on the melt-up names, even if you have no plans on initiating a position until after a significant pullback.
This piece will examine three stocks that have shown significant momentum in recent months. Though the chance of correction has likely increased, I find the names to be a must-watch for the second half.
Apple (AAPL)
It did not take long for Apple (NASDAQ:AAPL) shares to pick up the pace after many years of choppy action. Indeed, whenever AAPL stock fails to break through a ceiling of resistance, it tends to sink steadily for many months until its next attempt to break through.
On the back of a big Apple Intelligence reveal, Apple shares finally managed to break through resistance levels just shy of $200 per share in a big way. AAPL stock entered the summer season in melt-up mode (up over 40% from the April through to the July peak), catching many first-half profit-takers by shock. Where have all the bears gone?
After pulling back 4.5% off recent all-time highs of $234 and change, perhaps latecomers have another shot at punching their ticket at a reasonable price before Apple’s fall iPhone event (likely September 2024).
At 34.8 times trailing price-to-earnings (P/E), shares are not cheap. Still, if Apple’s generative AI tech is as good as it looked in WWDC 2024, perhaps AAPL stock has a path to $300 per share, the current Street-high target held by Loop Capital’s Ananda Baruah.
Costco (COST)
Like Apple, Costco (NASDAQ:COST) stock is retreating modestly (around 4%) after peaking this month. The recent mini-correction seems like a tiny blip when you zoom out to the five-year chart. Over the past five years, shares have more than tripled thanks to management’s ability to deliver value in a heated inflationary environment when it’s incredibly hard to stay within budget.
Costco offers more than just a good bang for the buck; it also gives consumers a wonderfully curated selection of goods. These days, Costco isn’t just a place to grab many gallons of iced tea at a bulky discount; it’s a place to buy precious metals amid the latest bullion gold rush and, pretty soon, Align Technology (NASDAQ:ALGN) gift cards.
Reportedly, Stifel noted that Align may enable Costco members to get $400 credit for Invisalign treatment for just $100.
For Costco members on the fence about straightening their teeth, such a deal may be too good to pass up. Indeed, the perks of being a Costco member are sweet. And that alone will likely make people not think twice about renewing even after the latest membership price hike.
Amgen (AMGN)
Amgen (NASDAQ:AMGN) is an intriguing biotech innovator at fresh all-time highs of $335 and change per share. After soaring more than 22% in the past three months, perhaps the $180 billion health juggernaut is worth buying again now that it’s looking up.
Perhaps the biggest reason to stick with AMGN stock is its shot at taking on the bulky weight-loss drug market with its oral treatment that goes by AMG786. Some analysts, like Matt Phipps of William Blair, are bullish on Amgen’s chances to take on the heavyweights (pardon the pun) in the weight-loss drug market.
Sure, it’s too early to tell if AMG786 or any other pipeline candidates will evolve to become big-time money-makers for the firm. Either way, the stock has a good amount of momentum behind it and a forward P/E multiple that’s way too lean at 17.2 times. And let’s not forget about the juicy 2.7% dividend yield, which sweetens the pot further for long-term investors.
On the date of publication, Joey Frenette held a long position at Apple. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
