These 20 stocks are strong choices for momentum investors

By Mark Hulbert

'Big mo' is an 'eternal feature' of financial markets worldwide

Momentum is an "eternal feature" of the financial markets, a recent study contends.

Momentum refers to the tendency for securities that have recently beaten the market to continue outperforming for a while longer and vice versa. The new study found that momentum strategies have worked in all stock markets globally, in all centuries studied, and in asset classes in addition to stocks.

The study, entitled "Momentum factor investing: Evidence and evolution," was conducted by Guido Baltussen and Bart van Vliet, both from the Erasmus School of Economics and Northern Trust Asset Management; M. Sipke Dom of the Erasmus School of Economics; and Milan Vidojevic of Northern Trust Asset Management. "In terms of scope, persistence, and success across nations, time periods, and asset classes," Baltuseen said in an email, "momentum stands out."

The seminal study of the phenomenon was published in the Journal of Finance in 1993. The authors of that study focused on U.S. stocks from 1965 to 1989. This new study of momentum investing greatly expands this scope, analyzing U.S. data through 2024 and back to 1866. The results showed momentum strategies were just as profitable, if not more so, in those prior and subsequent periods.

The authors of this new study also measured the success of momentum strategies in 46 countries outside the U.S. between 1990 and 2024. On average, these strategies performed just as well as in the U.S. They also documented that momentum exists beyond stock prices - in data series such as earnings, analyst revisions and successive news stories about a company.

The authors found momentum everywhere they looked. The strategy persisted "across extensive time frames (spanning up to 159 years of data), diverse portfolio designs (including over 4,000 different specifications), and global stock markets (from smaller emerging economies to larger developed markets)." They concluded that "momentum is an eternal feature of financial markets."

Exploiting momentum

This new study, in line with prior academic research into momentum, measures momentum's profit as the return differential between the stocks with the highest momentum and those with the greatest negative momentum (the biggest losses). To duplicate that return yourself, you would need to buy the highest-momentum stocks and simultaneously sell short an equal dollar amount of the biggest losers. However, many investors are reticent to sell stocks short.

Momentum strategies are still profitable when focusing only on the long side, though less so than a long-short momentum portfolio. The chart above compares the return since 1926 of a high-momentum portfolio (long side only) with that of the S&P 500 SPX. The portfolio significantly outperforms the latter.

With this thought in mind, I constructed the table below of the highest momentum stocks in the Russell 3000 Index RUA. Following the lead of most academic studies into momentum, I measured it over the trailing 12 months while excluding the current month. The 20 stocks in the table are listed in descending order of return over this period.

   Stock                               Total return from 1/31/2025 through 12/31/2025 
   Terns Pharmaceuticals Inc.                                                  805.8% 
   Celcuity Inc.                                                               734.6% 
   Palvella Therapeutics Inc.                                                  705.2% 
   Resolute Holdings Management                                                599.5% 
   Sandisk Corp.                                                               559.4% 
   Inhibrx Biosciences Inc.                                                    481.7% 
   Zenas BioPharma Inc.                                                        352.7% 
   D-Wave Quantum Inc.                                                         340.2% 
   Kodiak Sciences Inc.                                                        336.9% 
   Lumentum Holdings Inc.                                                      333.3% 
   Olema Pharmaceuticals Inc.                                                  309.2% 
   EchoStar Corp.                                                              293.0% 
   Nuvation Bio Inc.                                                           287.9% 
   Forge Global Holdings Inc.                                                  285.8% 
   Praxis Precision Medicines Inc.                                             285.0% 
   Cogent Biosciences Inc.                                                     281.5% 
   Falcon's Beyond Global Inc.                                                 276.2% 
   Bloom Energy Corp.                                                          268.5% 
   Taysha Gene Therapies Inc.                                                  266.7% 
   Vistance Networks Inc.                                                      259.0% 
                                                                         Source: LSEG 

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com1

More: Big Tech stocks are quickly falling out of favor. Here's the market's new momentum trade.

-Mark Hulbert

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