In a stock market that’s somewhat lacking in volatility, value investors are sure to find other things to be anxious about. Indeed, momentum is growing behind a wide range of names, especially those in tech with artificial intelligence (AI) plans and products under development.
For some value-conscious folks, the magnitude of momentum driven by an emerging technological trend may be enough to keep them glued to the bleachers. Momentum may be scary for value-conscious crowds, as volatility is for short-term traders. Yet, investors could miss out by not jumping into the game despite the higher admission prices.
Many of the market’s leading momentum plays in tech are being driven not just by upbeat sentiment but improving fundamentals. Let’ delve into three high flyers with solid legs.
Abercrombie & Fitch (ANF)
Shares of Abercrombie & Fitch (NYSE:ANF) continues to ride high, as the stock is up over 400% in the past year. The best part is that retail play, which had its heyday over 15 years ago, still looks more like a value play at less than 23 times trailing P/E.
Truly, management has had phenomenal turnaround. But sometimes, it’s changes in consumer behavior and tastes that are responsible for sudden and sharp sales surges. It can be challenging to predict when a mature market leader (like Lululemon (NASDAQ:LULU) will implode and when a firm fashionable in a prior decade, like Abercrombie & Fitch, will come back from a lengthy hibernation.
Though ANF stock looks like both a value and momentum stock, latecomers to ANF stock should be wary of the next phase of fashion. Abercrombie & Fitch is in today. But will it stay in next year? It’s tough to say right now.
However, there is still plenty of upside for the $9.1 billion mid-cap if it can stay stylish for a number of years as it did in the mid-2000s. Perhaps there’s more to see from ANF’s long-awaited encore as management does its best to keep customers (like those in the Gen Z cohort) coming back to its stores.
Cadence Design Systems (CDNS)
Cadence Design Systems (NASDAQ:CDNS) is one of the red-hot AI winners. Indeed, the stock has been on a blistering run, up nearly 100% in the past two years. However, the run has been dwarfed by the likes of Nvidia and other hardware-focused design firms.
Indeed, Cadence Design Systems stand behind the curtain of the AI boom. And while it may not get as much credit as the performers on the stage, it still deserves a round of applause for playing its vital part. For those unfamiliar with Cadence, it’s a chip design software developer whose role will only get more important as the semiconductor process shrinks and efficient design becomes harder to achieve without a bit of help from AI.
In late June, analysts at Baird praised chip design companies like Cadence as having “competitive moats.” I couldn’t agree more. The strong AI-driven growth prospects and solid economic positioning warrant the hefty 82.1 times trailing price-to-earnings (P/E) multiple.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock has been one of the hottest stocks over the past few weeks, rocketing more than 50% in the past month and 20% in just this past week. The opportunity to buy TSLA stock on the multi-year dip came and went rather quickly.
With the company’s robotaxi event less than a month away, it’s not hard to imagine many folks looking for it to act as a catalyst that could help power new all-time highs. The big question is whether August 8 (the date of Tesla’s looming robotaxi event) will result in a sell-the-news scenario or a continuation of the massive TSLA stock melt-down.
The other Magnificent Seven members have already broken out in a big way this year. It may be Tesla’s turn. Tesla and SpaceX’s top boss, Elon Musk, attempts to remind us all that Tesla is an AI company, not just a mere auto company.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. 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.