According to Investopedia, “Momentum investing is a trading strategy in which investors buy securities that are rising and sell them when they look to have peaked.” Typically, momentum investors also use stop-loss orders to quickly sell stocks that fall significantly.
Among the advantages of momentum trading is the ability to make profits very quickly and to benefit from most of the Street’s tendency to keep buying winning stocks. On the other hand, momentum investors can be badly hurt by sudden, unexpected bad news about a company. Other pitfalls include buying stocks early, before momentum has really taken hold, or late, after saturation has been reached. So momentum investing is a difficult art, but it can also be lucrative. For investors who want to utilize this technique, here are three top-notch momentum stocks to buy.
BlackBerry (BB)
Between April 1 and April 11, BlackBerry (NYSE:BB) stock jumped over 20%. The shares fell 4.4% on April 12 and tumbled 9.5% on April 15 as the stock market in general and small-cap stocks in particular fell sharply. But given the large, prior uptrend of the shares, I believe that they still have momentum. Moreover, because of two recent events, I think that a significant number of investors on the Street have finally become excited about the firm’s strong outlook.
First, BB reported impressive Q4 results as its revenue climbed nearly 15% versus the same period a year earlier to $173 million. Meanwhile, its EBITDA came in at $21 million. In Q4 of the previous year, it generated an EBITDA loss of $12 million. Also importantly, the sales of its Internet of Things unit jumped 25% year-over-year to an all-time record of $66 million. And, the backlog of its rapidly proliferating QNX operating system came in at a huge $815 million.
Secondly, on April 9, BlackBerry announced that it was collaborating with a leading chip maker, Advanced Micro Devices (NASDAQ:AMD), to combine the QNX operating system and hardware from AMD into an operating system for robotics. Given AMD’s top-notch reputation and QNX’s high level of IT security, along with the fact that robots are rapidly proliferating, the initiative should generate needle-moving revenue for BB over the longer term.
Amazon (AMZN)
On March 27, investment bank BTIG predicted that Amazon (NASDAQ:AMZN) stock could rise above $200. The bank stated that “Since 2000, April is AMZN’s best month, averaging +9.87% gain and up 18 vs. down 5 times.”
So far, the bank’s call has been on target, as AMZN stock rose about 3% from March 27 to April 12. To reach BTIG’s goal, however, the shares will have to climb another 8%. What’s more, we’re only halfway through April. In light of these points, I believe that the shares are likely to climb much further in the next two weeks.
Also positive for the stock’s near-term performance are upbeat comments made by CEO Andy Jassy about AWS, the firm’s cloud business that accounts for the lion’s share of its profits. Specifically, Jassy noted that, as of the end of last year, companies had become more willing to shell out funds on AWS’ offerings.
Wisdom Tree India Earnings Fund (EPI)
From March 19 to April 10, the WisdomTree India Earnings Fund (NYSEArca:EPI) climbed 6.5%. Until April 11, when the stock market fell sharply and ESI stock gave back 1.3%, the shares had gone nearly straight up. Given the stock’s performance in recent weeks, I expect it to continue advancing for at least the next few weeks.
EPI’s rally comes amid continued optimism about the Indian ec0nomy. Economists continue to expect it to grow a great deal as many American companies move more of their supply chains to the country.
The president of the Confederation of Indian Industry recently estimated that the nation’s GDP could consistently grow 8%-9% in the coming years. Meanwhile, Bloomberg recently suggested that India could overtake China to become the world’s second-largest economy by 2028.
On the date of publication, Larry Ramer held long positions in BB,AMZN, and EPI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.