Riding the Momentum Wave: Three Stocks Poised for Continued Growth
The market’s fascination with momentum investing, the strategy of betting on stocks that are already on an upward trajectory, has seen a resurgence. This approach, formally introduced by researchers Jegadeesh and Titman in 1993, posits that recent winners are more likely to continue winning. While past performance does not guarantee future results, the **iShares MSCI USA Momentum Factor ETF (MTUM)**, a significant benchmark for this strategy, has demonstrably outperformed the S&P 500 over the past decade, showcasing the potential benefits of this approach. This article will explore three compelling momentum stocks currently displaying strong growth indicators, highlighting their unique strengths and future prospects.
Key Takeaways: Momentum Stocks to Watch
- Momentum investing, a strategy that bets on continued upward trends in recently successful stocks, is proving its mettle once more.
- **Intuitive Surgical (ISRG)**, a leader in robotic surgery, showcases substantial revenue growth and impressive profitability, driven by the innovative da Vinci surgical system.
- **Dell (DELL)**, adapting successfully to the AI revolution, enjoys massive growth in its AI-optimized server business, suggesting a strong position in the evolving tech landscape.
- **Eli Lilly (LLY)**, a pharmaceutical giant, benefits significantly from the booming demand for GLP-1 diabetes and weight-loss drugs, showcasing robust sales growth and market dominance.
Intuitive Surgical: Precision, Innovation, and Growth in Robotic Surgery
Intuitive Surgical (ISRG) stands as a compelling example of momentum investing in action. With a remarkable 66% total return over the past twelve months, significantly outpacing the S&P 500, ISRG is a testament to the power of innovation. The company’s flagship product, the da Vinci surgical system, is revolutionizing minimally invasive surgery.
Advantages of the da Vinci System
The da Vinci system offers several key advantages over traditional surgical methods. Its robotic arms provide surgeons with unparalleled precision and control, minimizing human error associated with hand tremors and enabling smaller, more accurate incisions. This results in less invasiveness, reduced complications, and faster patient recovery times.
Sustained Growth and Profitability
Even after more than a decade in the market, Intuitive Surgical continues to demonstrate impressive growth. The company reported a 14% increase in revenue last quarter, further solidifying its position as a market leader. This revenue growth is coupled with strong profitability, indicating impressive operational efficiency. The company boosted its gross margin by over 150 basis points and its operating margin by nearly 200 basis points compared to the previous year. This performance surpasses 91% of companies in the US healthcare sector, showcasing the company’s exceptional financial health and market dominance.
Dell: Riding the AI Wave with High-Demand Servers
Dell (DELL), a legacy tech giant, epitomizes successful adaptation in a rapidly changing technological landscape. With a 67% total return over the past twelve months, Dell has proven its ability to navigate the challenges of emerging technologies, particularly artificial intelligence (AI). Unlike some competitors, Dell has strategically focused on the burgeoning AI and data center market.
Transforming from PCs to AI Infrastructure
While historically known for its personal computer (PC) business, Dell has diversified its offerings, with its **Infrastructure Solutions Group** now contributing nearly half of its total revenue. This segment specializes in the design and sale of AI-optimized servers for data centers, experiencing explosive growth. The company saw an astounding 80% increase in AI server sales in just one quarter, surpassing the combined total sales of its fiscal 2024 for this product line. Further fueling optimistic projections, Dell maintains a significant $3.8 billion backlog in AI server orders, indicating robust future demand.
Future Potential: PCs and the Generative AI Boom
While Dell’s PC business experienced stagnant growth last quarter, there’s potential for revival. As businesses and individuals need to replace outdated systems and seek devices capable of handling **generative AI (GenAI)** applications, demand for updated PCs is expected to increase, presenting another substantial revenue opportunity for Dell in the near future.
Eli Lilly: Dominating the Pharmaceutical Market with GLP-1 Drugs
Eli Lilly (LLY) emerges as yet another compelling momentum stock, boasting a substantial 66% total return over the past twelve months and a staggering 295% return over the past three years. This significant growth can be largely attributed to the company’s leading role in the flourishing market for **GLP-1 (glucagon-like peptide-1)** drugs used in diabetes and weight-loss treatments. **Mounjaro and Zepbound**, two of Lilly’s flagship GLP-1 drugs, are major drivers of this success.
Market Leadership and Competitive Advantages
With a market cap exceeding that of even its closest competitor by over $250 billion, Eli Lilly’s dominance in the pharmaceutical industry is unquestionable. Its impressive **gross and operating margins rank among the top three** amongst the ten largest pharmaceutical companies in the US, Canada, and Europe. The remarkable 71% and 140% growth in Mounjaro and Zepbound’s sales, respectively, in just one quarter, showcases the substantial appeal and market demand for Eli Lilly’s innovative GLP-1 medications.
Competitive Edge over Novo Nordisk
Compared to its main competitor, Novo Nordisk (NVO), Eli Lilly enjoys a strategic advantage. While GLP-1 drugs account for a substantial **66% of Novo Nordisk’s sales**, they represent only 46% of Eli Lilly’s total revenue, suggesting reduced dependency on this specific segment. The superior efficacy of Mounjaro and Zepbound in weight loss, compared to Novo Nordisk’s Ozempic and Wegovy, is also contributing to Eli Lilly’s increasing market share.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Conduct thorough research and consult with a financial advisor before making any investment decisions.
