“It seems like the momentum stocks that have got us here still remain in favor with our customers.” This was highlighted by Steve Sosnick, Chief Strategist at Interactive Brokers, in a late December 2025 interview with CNBC. Sosnick said the market environment is marked by continuous retail inflows, while citing data from his firm’s platform. According to this data, in most weeks, the vast majority of the 25 most actively traded stocks on the platform are net buys, meaning more clients are buying than selling. Popular stocks include Tesla, NVIDIA, Micron Technology, Oracle, Broadcom, and Palantir Technologies.
The broader market environment also supports momentum stocks. The S&P 500 Index has already closed in on the 7,000 level, up 1% year to date, and several Wall Street strategists’ estimates over the last two to three months indicate it could reach as much as 7,800 this year.
READ ALSO: 11 Best Machine Learning Stocks to Buy According to Analysts and 12 Best Software Infrastructure Stocks to Buy According to Hedge Funds.
Despite index-level strength, select momentum names are still trading at valuation discounts relative to their earnings growth. In a February 19, 2026, interview, Tom Lee, Head of Research at Fundstrat, said he believes the S&P 500 could rise toward 7,300 in the near term. Lee said that a large percentage of companies have exceeded earnings expectations, but stock prices have not fully reflected that strength due to pressure on valuation multiples. He argued:
I think the stocks haven’t reflected that, because we’ve had a huge beat, a large percentage of companies beating. It has shown up, I guess, in small caps.” He added further, “I mean, there’s this old adage that it takes a whole lot of E to offset PE. Meaning like you’re right, the earnings have been good, but things that have affected multiples are what’s causing the market to come in. You know, AI, a new Fed chair, potential war. So, you’re right. I think the fundamental anchoring is actually good. So that means stocks eventually kind of re-anchor to that and we go higher.
Finally, Lee suggested that NVIDIA’s upcoming earnings could be important. A strong report could help calm fears about AI spending and potentially mark a turning point, especially for software stocks that have been in decline.
Within this context, momentum stocks that continue to post strong results but trade at discounts to their recent peak multiples stand out. In some cases, technology names are now trading at relative valuations below historical levels despite maintaining strong competitive positions and benefiting from structural themes such as AI adoption and digital transformation.
With that backdrop, let’s explore our selection of the 15 undervalued momentum stocks that are taking off.
Our Methodology
To identify undervalued momentum stocks that are taking off, we first compiled a list of U.S.-listed stocks with a market capitalization of at least $2 billion that have returned at least 20% over the last three months. From this universe, we shortlisted stocks with a forward PE below 15 and with the 50-day moving average above the 200-day moving average, indicating a bullish trend. We then used Q3 2025 data from Insider Monkey’s database to determine hedge fund ownership and narrowed the list to the 15 most widely held names. Finally, the stocks were ranked in ascending order by the number of hedge funds holding positions.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
15. Liberty Energy Inc. (NYSE:LBRT)
Number of Hedge Fund Holders: 44
Citi increased its price target on Liberty Energy Inc. (NYSE:LBRT) to $32 from $21, according to a report on February 17. The firm cited two reasons for this revision: first, its confidence that the company will achieve and exceed the 2029 capacity target of 3 gigawatts (GW), driven by strong demand from hyperscale companies. Second, the company’s competitive positioning amid the increasing need to make residential utility bills affordable.
In an early February report, Goldman Sachs maintained its Neutral rating on Liberty Energy Inc. (NYSE:LBRT) but raised its price target to $26 from $20, citing growing confidence in the company’s power solutions segment. In that regard, the first factor the firm highlighted was the company’s recent power reservation agreements, which support growth. Secondly, similar to Citi, Goldman now expects the company to support the deployment of 3GW of power capacity by 2029, up from earlier expectations.
According to Goldman, both developments indicate that Liberty’s data center power strategy is gaining momentum, as evidenced by the recent deal with Vantage Data Centers.
The aforesaid deal with Vantage was announced in early January 2026, under which Liberty’s subsidiary, Liberty Power Innovations (LPI), and Vantage will collaborate to deliver up to 1GW of power agreements between LPI and end-users of Vantage’s data centers over the next five years.
Such developments and views have supported Liberty Energy Inc.’s (NYSE:LBRT) recent share price gains. Its stock has gained around 45% since the start of 2026, as of February 20, a strong performance after a 7% decline in 2025.
Before Goldman, Josh Silverstein at UBS raised Liberty’s price target from $23 to $34, the highest among analysts covering the stock, and implying a 27% upside from the February 20 close. Silverstein reaffirmed his Buy rating as well.
Liberty Energy Inc. (NYSE:LBRT) is an energy services company and one of the largest providers of completion services and technologies to onshore oil, natural gas, and enhanced geothermal energy producers in North America. Liberty also owns and operates Liberty Power Innovations LLC, providing advanced distributed power and energy storage solutions.
14. Edison International (NYSE:EIX)
Number of Hedge Fund Holders: 45
On February 13, Edison International (NYSE:EIX) was downgraded from Buy to Neutral by UBS, which cited the company’s valuation as the primary reason. However, the firm raised its price target by about 11% to $78 (from $70), according to a TipRanks report.
UBS stated that Edison’s share price has appreciated by around 21% over the last six months, outperforming the Dow Jones Utility Index, which rose a mere 1% during the same period. This outperformance leaves little upside based on the firm’s estimates and is not sufficient to support a Buy rating; thus, UBS has stepped to the sidelines.
This report also notes that UBS believes the risk/reward is balanced in the near term. The analysts argue that the potential resolution of the Eaton fire liability is supportive, but the Phase 2 wildfire legislation would still take around six months, which would weigh on the share price in the near term. Moreover, the upcoming California gubernatorial election poses policy and regulatory risks, according to UBS.
After a strong rally since 2020, the share price peaked in late 2024 at around $88 and nearly halved by mid-2025. It closed 2025 down 25% but has partially recovered since the start of 2026, with gains of 23% so far.
The broader analyst consensus is cautious on Edison International (NYSE:EIX), with more analysts assigning a Hold or Sell rating (53%) than a Buy (47%). Based on these analysts’ estimates, the 1-year median price target of $73 implies a 1% downside.
Edison International (NYSE:EIX) is a public utility holding company that, through its subsidiaries, generates and distributes electric power. Its subsidiary Southern California Edison delivers electricity to 15 million residential, commercial, industrial, public authorities, agricultural, and other customers across Southern, Central, and Coastal California. The company also provides energy solutions to commercial and industrial users.
