In this article, we will discuss the 10 Best Momentum Stocks to Buy According to Hedge Funds.

In the fast-paced world of investing, momentum is a force that can propel portfolios to new heights—or leave them vulnerable to abrupt reversals. Momentum investing, a strategy centered on capitalizing on upward-trending stocks, has gained renewed attention as markets navigate economic uncertainty, technological disruption, and shifting consumer behaviors. For investors seeking to harness this strategy, the choices of hedge funds—often regarded as the “smart money” on Wall Street—offer a compelling roadmap. These institutions deploy vast resources, cutting-edge analytics, and seasoned expertise to identify stocks with the potential to sustain momentum.

The Allure of Momentum Investing:

Momentum investing is based on the idea that stocks with strong recent performance are likely to keep rising. This momentum is driven by factors such as positive earnings surprises, favorable sector trends, or shifts in the economy. Unlike value investing, which focuses on undervalued stocks, momentum investing capitalizes on market psychology, riding waves of optimism and institutional buying.

Why Hedge Funds Matter:

Hedge funds manage billions in assets and employ teams of analysts, quantitative models, and proprietary data to stay ahead of trends. Their stock picks often reflect deep conviction in a company’s fundamentals, competitive edge, or alignment with transformative themes like artificial intelligence (AI), renewable energy, or healthcare innovation. When multiple hedge funds converge on a stock, it signals collective confidence in its momentum potential. Moreover, their filings—such as quarterly 13F disclosures—provide a window into their strategies, offering retail investors actionable insights. While past performance is no guarantee, tracking these moves may help identify high-conviction opportunities poised for sustained growth.

Growth of Momentum Stocks:

Momentum stocks have experienced significant growth recently, driven by advancements in artificial intelligence, healthcare, and digital transformation. In 2024, momentum investing emerged as one of the top-performing strategies, with high-momentum stocks outperforming low-momentum ones by 28% year-over-year as of December 11, 2024, as reported by Morgan Stanley.

Hedge funds have been instrumental in this trend, significantly increasing their investments in momentum-driven sectors. For instance, hedge funds boosted their exposure to financial firms by 50%, totaling $340 billion, contributing to a 33% surge in the NASDAQ Bank Index, which outpaced both the broader market and the tech-heavy Nasdaq.

The power of momentum investing is particularly evident in sectors like technology, with companies leading the charge in artificial intelligence and cloud computing. For instance, during the first three quarters of 2024, AI-related startups raised $6 billion, accounting for 14.6% of total climate tech investment, according to a report by PwC. With this in mind, let’s take a look at some of the best momentum stocks.

Our Methodology

For this list, we analyzed the holdings of the iShares MSCI USA Momentum Factor ETF (MTUM), which targets U.S. stocks exhibiting strong momentum based on factors like price and earnings growth. We then cross-referenced these holdings with Insider Monkey’s Q3 2024 hedge fund database to identify which companies in the ETF had the highest number of hedge fund investors. By ranking these companies based on the number of hedge funds holding positions, we compiled a list of momentum stocks that show strong performance trends and are favored by most hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

10. Vertiv Holdings Co (NYSE:VRT)

Number of Hedge Fund Holders: 91

Vertiv Holdings Co (NYSE:VRT) is a global leader in providing critical infrastructure technologies and services for data centers, communication networks, and commercial and industrial facilities. The company offers a wide range of products and solutions, including power, thermal, and IT infrastructure management.

Vertiv Holdings Co. (NYSE:VRT) is strengthening its position in the digital infrastructure market with strategic acquisitions, partnerships, and new product offerings. Its recent acquisition of BiXin Energy’s centrifugal chiller technology boosts its ability to support high-performance computing and AI applications. This positions the company to meet the increasing demand in these areas. The company also launched its Liquid Cooling Services portfolio, addressing the growing need for cooling in high-density computing, especially in AI and high-performance computing. With these efforts, Vertiv Holdings Co (NYSE:VRT)  is well-positioned to benefit from the ongoing digital transformation.

Vertiv Holdings Co (NYSE:VRT) reported solid Q4 2024 results with a 77% increase in adjusted EPS to $0.99. Net sales grew by 26%, reaching $2.35 billion, while operating profit surged 60% to $457 million. The company also achieved strong cash flow, with an adjusted free cash flow of $362 million in Q4. For 2025, Vertiv Holdings Co (NYSE:VRT) expects a 25% increase in adjusted EPS, with a forecast of $3.50 to $3.60.

Chris Snyder of Morgan Stanley initiated coverage on Vertiv Holdings Co (NYSE:VRT) with a “Buy” rating and a price target of $150, implying a potential upside of 37.26%.

9. Oracle Corporation (NYSE:ORCL)

Number of Hedge Fund Holders: 91

Oracle Corporation (NYSE:ORCL) is a global leader in cloud computing and enterprise software solutions, renowned for its comprehensive suite of products and services. The company offers database management systems, cloud infrastructure, and applications, catering to businesses of all sizes. ORCL is one of the best momentum stocks on our list.

Oracle Corporation (NYSE:ORCL) is working to expand its technological footprint and global reach. The company continues to enhance its cloud infrastructure, recently announcing the addition of eight new regions and advanced features for the company’s Database@Google Cloud. Moreover, it has deepened its commitment to artificial intelligence by participating in the launch of Stargate, a $500 billion joint venture with OpenAI and SoftBank to invest in AI infrastructure across the U.S.

Oracle Corporation (NYSE:ORCL) reported strong Q2 fiscal 2025 results, with total revenue reaching $14.1 billion, up 9% year-over-year, driven by a 12% increase in cloud services and license support revenues. The company’s operating income for the quarter was $4.2 billion, while GAAP earnings per share (EPS) rose 24% to $1.10. Non-GAAP EPS increased by 10% to $1.47. Oracle Corporation (NYSE:ORCL)’s cloud infrastructure business saw impressive growth, with revenue up 52%, reflecting the strong demand for AI solutions.