Investors love momentum stocks, especially if they have jumped on the bandwagon before it’s too late.
At the end of July, shares of Nvidia Corp. NVDA, +0.25% were up 81% for 2020 and were trading for 47 times the consensus earnings estimate for the subsequent 12 months, among analysts polled by FactSet. So the stock was up 129% for 2020 through the close on Nov. 18, with a forward price-to-ratio of 47.9. The forward P/E ratio had risen only modestly from the end of July, because analysts increased their earnings estimates.
Screening for more momentum stocks To come up with a list of other stocks that have had the wind at their backs with solid support from analysts, we began with the S&P 1500 Composite Index, which is made up of the S&P 500 SPX, +0.29%, the S&P 400 Mid Cap Index MID, -0.92% and the S&P Small Cap 600 Index SML, -0.15%. Then we excluded companies with market capitalizations of less than $2 billion and those covered by fewer than 10 sell-side analysts.