10 Best Momentum ETFs To Buy

Published on March 27, 2024 at 8:38 am by Hamna Asim in ETF Trading, Lists, News

In this article, we discuss 10 best momentum ETFs to buy. If you want to skip our discussion on momentum investing and the stock market outlook, head over to 5 Best Momentum ETFs To Buy.

What is Momentum Investing?

Momentum investing refers to a strategy that increases portfolio exposure to stocks with robust performance while lowering exposure to those with weaker performance. This approach revolves around buying stocks with upward-trending prices and it has been historically backed by economic theory and empirical evidence. Typically targeting a 12-month timeframe, momentum strategies consistently record positive returns and add diversity to investment portfolios. According to BlackRock, the concept of momentum can be best grasped through behavioral finance theories. It stems from investors’ behavioral tendencies, where individual actions reinforce market trends. Moreover, momentum rewards may offset the risk of short-term underperformance that some investors avoid. Despite occasional short-term setbacks, like those seen in 2001, 2009, and 2023, momentum consistently offers lasting benefits. Both risk-based and behavioral-based explanations play a role in its persistence, supporting the belief that momentum will remain a viable strategy in the future.

Momentum Gaining Momentum

The renewed interest in Bitcoin and the stock market suggests that there might be a big bubble forming. While gold’s record contradicts this notion to some extent, hinting at genuine caution driven by concerns over unsustainable fiscal spending, signs of things getting too heated are still there. According to a recent Bloomberg report, when looking closely at how stocks in the S&P 500 index are moving, there is a similar pattern to what happened during the big bubble in the late 1990s and early 2000s. People are doing really well by purchasing stocks that have been doing well lately and investing in companies with growing earnings, putting momentum trading and growth investing in the spotlight. These strategies have been doing better than value investing. The current market rally seems to follow these patterns, especially with momentum trading making a strong comeback. Notably, the emergence of the Magnificent Seven as the prevailing investing theme in early 2023 led to a challenging period for momentum trading. However, the current situation differs, with momentum gaining momentum once again.

In January 2024, Charles Schwab’s chief investment strategist Liz Ann Sonders participated in CNBC’s “Last Call” to discuss the markets. Sonders noted that when benchmarks like the S&P 500 and Dow hit record highs, it drives the momentum higher – at least for a while when the market ignores earnings and market fundamentals, focusing on performance only. Similarly, Jeremy Siegel, Wharton School professor, joined CNBC’s ‘Closing Bell’ on March 8, 2024. Siegel talked about momentum investing trending these days, but he also said that in his experience, trending stocks might see a slump of a few days before getting back on an upwards trajectory. However, by then, most momentum investors have already pulled out of their holdings. The investors then quickly hop onto the trades they just sold to reap the benefits of the ongoing market rally. He noted that individuals need ‘nerves of steel’ for momentum investing. Siegel observed that momentum followers usually do not care about a company’s valuation, its management, or its operational efficiency. They just look at current performance charts and jump on, leading select companies to skyrocket, sometimes even without proper fundamentals supporting the growth. Siegel stated that momentum investors believe in ‘making the trend your friend’ and they are confident that they can ‘jump off the train before it falls off the cliff’.

However, on March 26, 2024, Liz Young, SoFi head of investment strategy, appeared on ‘Closing Bell’ and said that momentum in equities is fading. Breaking down her statement, she highlighted that from October to December 2023, momentum and high beta led the markets. Heading into 2024, momentum was still leading but slightly slowing down, with investor focus shifting to low volatility and quality stocks. Young observed that in March, low volatility, quality, value, and dividends are leading the rally. In terms of the momentum behind the market rally itself, Young commented that the velocity and fervor is fading but the rally is not about to be over entirely. There is room for stocks to continue skyrocketing. Although, the rebalance at the end of Q1 2024 could pose a risk to momentum followers.

Some of the top momentum stocks to buy include Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA). However, we discuss the best momentum ETFs in this article.

Our Methodology

We curated our list of the best momentum ETFs by choosing consensus picks from multiple credible websites. We have mentioned the 5-year share price performance of each ETF as of March 26, 2024, ranking the list in ascending order of the share price. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.

A view of the hustle and bustle of trading activity on a busy trading floor.

Best Momentum ETFs To Buy

10. Invesco Dorsey Wright Momentum ETF (NASDAQ:PDP)

5-Year Share Price Performance as of March 26: 74.06%

Invesco Dorsey Wright Momentum ETF (NASDAQ:PDP) is based on the Dorsey Wright Technical Leaders Index, comprising about 100 US companies from the NASDAQ US Benchmark Index. It utilizes a proprietary methodology by Dorsey, Wright & Associates, LLC to select firms showing strong relative strength characteristics. As of March 25, 2024, Invesco Dorsey Wright Momentum ETF (NASDAQ:PDP) expense ratio came in at 0.62%. The fund was launched on March 1, 2007. It ranks 10th on our list of the best momentum ETFs.

O’Reilly Automotive, Inc. (NASDAQ:ORLY) is one of the top holdings of Invesco Dorsey Wright Momentum ETF (NASDAQ:PDP). It is a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, and Mexico. On February 7, O’Reilly Automotive, Inc. (NASDAQ:ORLY) reported a Q4 GAAP EPS of $9.26, beating market estimates by $0.05, and a revenue of $3.83 billion, missing Street consensus by $30 million.

According to Insider Monkey’s fourth quarter database, 52 hedge funds were long O’Reilly Automotive, Inc. (NASDAQ:ORLY), compared to 45 funds in the prior quarter.

Like Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA), O’Reilly Automotive, Inc. (NASDAQ:ORLY) is one of the best momentum stocks to invest in.

Wedgewood Partners stated the following regarding O’Reilly Automotive, Inc. (NASDAQ:ORLY) in its fourth quarter 2023 investor letter:

“O’Reilly Automotive, Inc. (NASDAQ:ORLY) was also a bottom contributor to portfolio performance. The Company reported +11% sales growth for the quarter, driven by a +17% increase in sales to professional service providers, leading to +12% growth in operating income and +17% increase in earnings per share. The Company – true to its long capital allocation culture – has aggressively bought back shares over the past 12 months. O’Reilly Automotive’s professional sales segment continues to dramatically outpace its publicly traded competitors. The Company has a mostly singular focus on the United States, whereas several of its competitors have diverted their attention away from the large and fragmented U.S. professional market, toward non-U.S. or non-automotive markets. In the short-term, investors are focused on the mild weather that has unfolded during the late fall and early winter of 2023. Mild weather often leads to temporary slowdowns in sales growth for auto parts, but we would look to take advantage of that because O’Reilly’s long-term competitive positioning and extraordinary returns on capital are well-entrenched.”

9. Invesco DWA SmallCap Momentum ETF (NASDAQ:DWAS)

5-Year Share Price Performance as of March 26: 76.65%

Invesco DWA SmallCap Momentum ETF (NASDAQ:DWAS) tracks the Dorsey Wright SmallCap Technical Leaders Index, which selects approximately 200 companies based on their market performance and relative strength characteristics according to a proprietary methodology by Dorsey, Wright & Associates, LLC. These companies are chosen from the NASDAQ US Benchmark Index. As of March 25, 2024, Invesco DWA SmallCap Momentum ETF (NASDAQ:DWAS)’s expense ratio came in at 0.60%. It is one of the best momentum ETFs to buy.

Modine Manufacturing Company (NYSE:MOD) is the largest holding of Invesco DWA SmallCap Momentum ETF (NASDAQ:DWAS). The company specializes in providing engineered heat transfer systems and components for OEM vehicular applications. On March 19, Oppenheimer assigned an Outperform rating to Modine Manufacturing Company (NYSE:MOD) and set a price target of $105. Analyst Noah Kaye highlighted Modine Manufacturing Company (NYSE:MOD)’s expansion into data centers and diversification as drivers for potential positive earnings revisions. Additionally, Kaye noted the company’s involvement in scaling electric vehicles and the potential for mergers and acquisitions in climate solutions as further catalysts for growth.

According to Insider Monkey’s fourth quarter database, 28 hedge funds were bullish on Modine Manufacturing Company (NYSE:MOD), compared to 30 funds in the prior quarter.

Carillon Chartwell Small Cap Value Fund made the following comment about Modine Manufacturing Company (NYSE:MOD) in its Q3 2023 investor letter:

“Modine Manufacturing Company (NYSE:MOD) was another strong performer. Modine’s performance technologies segment is experiencing high demand as it provides thermal solutions for electronic vehicle (EV) and hybrid vehicle manufacturers. The company also has focused on growth opportunities in the data-center market, selling data center cooling solutions needed for energy intensive artificial intelligence (AI) projects.”

8. Fidelity Momentum Factor ETF (NYSE:FDMO)

5-Year Share Price Performance as of March 26: 78.85%

Fidelity Momentum Factor ETF (NYSE:FDMO) ranks 8th on our list of the best momentum ETFs. Fidelity Momentum Factor ETF (NYSE:FDMO) aims to replicate the performance of the Fidelity U.S. Momentum Factor Index before fees and expenses. This index is tailored to mirror the performance of large and mid-cap US companies showing positive momentum signals. As of December 31, 2023, the ETF has net assets of $161.4 million and an expense ratio of 0.15%, along with a portfolio of 130 stocks.

Apple Inc. (NASDAQ:AAPL) is the largest holding of Fidelity Momentum Factor ETF (NYSE:FDMO). Despite reports of weaker demand in China, Apple’s iPhone builds remained stable, while competitors Samsung and Huawei saw increases in the first quarter of 2024, surpassing TD Cowen’s projections as of March 26. However, TD Cowen expects Apple Inc. (NASDAQ:AAPL) to produce 48 million iPhone units in Q1 2024, marking a 14% year-over-year decrease, with a further decline to 39 million units in Q2, representing a 7% drop compared to the previous year.

According to Insider Monkey’s fourth quarter database, 131 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), compared to 134 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 905.56 million shares worth $174.3 billion.

Orbis Global Equity Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter:

“Never before has following the crowd made so much money. Nor, in our estimation, so little sense. But just look at the opportunities the crowd has left for those of us willing to take a different view. We could wax lyrical about the glaring difference in value between Korean banks priced at 4 times earnings, versus Apple Inc. (NASDAQ:AAPL) at 28 times, despite diverging fundamentals—Apple is increasingly at risk of bans in China, while Korean banks could double their dividends.”

7. Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM)

5-Year Share Price Performance as of March 26: 88.24%

Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM) tracks the S&P 600 High Momentum Value Index, which comprises 120 securities from the S&P SmallCap 600 Index with the highest combined “value scores” and “momentum scores”. Constituents of the index are weighted based on their value scores, with higher scores receiving greater weights. As of March 25, 2024, Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM)’s expense ratio stood at 0.36%. It is one of the best momentum ETFs to buy.

Kelly Services, Inc. (NASDAQ:KELYA) is the top holding of Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM). Kelly Services, Inc. (NASDAQ:KELYA) offers workforce solutions across different industries through its five segments – Professional & Industrial, Science, Engineering & Technology, Education, Outsourcing & Consulting, and International. On February 15, Kelly Services, Inc. (NASDAQ:KELYA) reported a Q4 non-GAAP EPS of $0.93 and a revenue of $1.23 billion, outperforming Wall Street estimates by $0.37 and $10 million, respectively.

According to Insider Monkey’s fourth quarter database, 14 hedge funds were bullish on Kelly Services, Inc. (NASDAQ:KELYA), compared to 10 funds in the last quarter.

Like Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA), Kelly Services, Inc. (NASDAQ:KELYA) is one of the top stocks for momentum investors.

Here is what Palm Valley Capital Management has to say about Kelly Services, Inc. (NASDAQ:KELYA) in its Q3 2022 investor letter:

“We acquired four new positions during the quarter—two of these were recycled. The Fund bought back Kelly Services (NASDAQ:KELYA), a prior holding, and established a new weighting in ManpowerGroup (NYSE:MAN). Both companies serve the staffing industry. Staffing is cyclical, and we expect results for these companies to deteriorate in a recession, even though margins haven’t fully recovered yet from the lockdowns. In our judgment, during previous downturns, their operating performance was acceptable for a cyclical trough. We believe the valuations for Kelly and Manpower are becoming increasingly compelling. Kelly trades at a 46% discount to tangible book value. The company’s net assets are primarily supported by a mountain of receivables. Neither Kelly nor Manpower experienced significant credit losses during the last recession. ManpowerGroup’s $4 billion Enterprise Value is 6.7x its five-year average operating income before amortization, which includes a trough in 2020. Manpower is based in the U.S., but it earns the majority of revenues from Europe. We think the firm’s European exposure has placed it in the doghouse among investors, given the unique risks facing those economies. Manpower’s translated results are also weighed down by the rocketing U.S. dollar…” (Click here to see the full text)

6. Vanguard U.S. Momentum Factor ETF ETF Shares (BATS:VFMO)

5-Year Share Price Performance as of March 26: 90.11%

Vanguard U.S. Momentum Factor ETF ETF Shares (BATS:VFMO) employs a rules-based quantitative model to assess US common stocks, focusing on those with robust recent performance. The fund’s portfolio encompasses a range of stocks across different market capitalizations, market sectors, and industry groups. Its benchmark is the Russell 3000 Index. Vanguard U.S. Momentum Factor ETF ETF Shares (BATS:VFMO) is one of the best momentum ETFs to monitor. As of March 25, 2024, the fund’s expense ratio came in at 0.13%, along with net assets of $452.1 million and a portfolio of 574 stocks.

Meta Platforms, Inc. (NASDAQ:META) is the largest holding of Vanguard U.S. Momentum Factor ETF ETF Shares (BATS:VFMO). On March 18, Mizuho Securities added Meta Platforms, Inc. (NASDAQ:META) as a top pick, maintaining a Buy rating and a $575 price target on the shares. Analyst James Lee predicts stron

g revenue growth for the company in fiscal 2024, driven by improvements in Reels monetization, geographic expansion, Amazon partnership with Shops, and optimized video placements. Long-term investments in WhatsApp, generative AI, and Llama could also lead to a significant increase in revenue per user.

According to Insider Monkey’s fourth quarter database, 242 hedge funds were bullish on Meta Platforms, Inc. (NASDAQ:META), compared to 234 funds in the last quarter.

Sequoia Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its fourth quarter 2023 investor letter:

“Two additional trims, in Meta Platforms, Inc. (NASDAQ:META) and Carmax, were more substantive in nature. When Meta’s stock declined in 2022, we judged it to be significantly mispriced and held our ground through the bottom. We trimmed the position serially last year as the stock soared because we were wary of holding a large position exposed to significant regulatory risks, particularly in Europe. We are comfortable owning Meta at today’s much-reduced weighting and current valuation. The smaller position size reflects our updated assessment of the balance of long-term risk versus reward.”

Click to continue reading and see 5 Best Momentum ETFs To Buy.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

The whispers are turning into roars.

Artificial intelligence isn’t science fiction anymore.

It’s the revolution reshaping every industry on the planet.

From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.

Here’s why this is the prime moment to jump on the AI bandwagon:

Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.

Imagine every sector, from healthcare to finance, infused with superhuman intelligence.

We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.

This isn’t a maybe – it’s an inevitability.

Early investors will be the ones positioned to ride the wave of this technological tsunami.

Ground Floor Opportunity: Remember the early days of the internet?

Those who saw the potential of tech giants back then are sitting pretty today.

AI is at a similar inflection point.

We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.

This isn’t just about making money – it’s about being part of the future.

So, buckle up and get ready for the ride of your investment life!

Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)

The AI revolution is upon us, and savvy investors stand to make a fortune.

But with so many choices, how do you find the hidden gem – the company poised for explosive growth?

That’s where our expertise comes in.

We’ve got the answer, but there’s a twist…

Imagine an AI company so groundbreaking, so far ahead of the curve, that even if its stock price quadrupled today, it would still be considered ridiculously cheap.

That’s the potential you’re looking at. This isn’t just about a decent return – we’re talking about a 10,000% gain over the next decade!

Our research team has identified a hidden gem – an AI company with cutting-edge technology, massive potential, and a current stock price that screams opportunity.

This company boasts the most advanced technology in the AI sector, putting them leagues ahead of competitors.

It’s like having a race car on a go-kart track.

They have a strong possibility of cornering entire markets, becoming the undisputed leader in their field.

Here’s the catch (it’s a good one): To uncover this sleeping giant, you’ll need our exclusive intel.

We want to make sure none of our valued readers miss out on this groundbreaking opportunity!

That’s why we’re slashing the price of our Premium Readership Newsletter by a whopping 75%.

For a ridiculously low price of just $24, you can unlock a year’s worth of in-depth investment research and exclusive insights – that’s less than a single restaurant meal!

Here’s why this is a deal you can’t afford to pass up:

The Name of the Game-Changing AI Stock: Our in-depth report dives deep into our #1 AI stock’s groundbreaking technology and massive growth potential.
Ad-Free Browsing: Enjoy a year of investment research free from distracting banner and pop-up ads, allowing you to focus on uncovering the next big opportunity.
Lifetime Money-Back Guarantee: If you’re not absolutely satisfied with our service, we’ll provide a full refund ANYTIME, no questions asked.

Space is Limited! Only 1000 spots are available for this exclusive offer. Don’t let this chance slip away – subscribe to our Premium Readership Newsletter today and unlock the potential for a life-changing investment.

Here’s what to do next:

Head over to our website and subscribe to our Premium Readership Newsletter for just $24.
Enjoy a year of ad-free browsing, exclusive access to our in-depth report on the revolutionary AI company, and the upcoming issues of our Premium Readership Newsletter over the next 12 months.
Sit back, relax, and know that you’re backed by our ironclad lifetime money-back guarantee.

Don’t miss out on this incredible opportunity! Subscribe now and take control of your AI investment future!

Subscribe Now!

A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…

Insider Monkey Ads

Markets

Insider Trading

Hedge Funds

Retirement

Opinion

Log In

Sign Up