What if someone asks – what’s better than a stock going up? Answer should be – an undervalued stock going up. That’s the essence of this strategy—combining value with momentum. It’s about finding those underappreciated names that are catching investors’ attention and are rising. For investors, this can offer the best of both worlds: upside potential at a reasonable price.

Momentum investing focuses on stocks that have shown recent price strength, under the assumption that this strength will continue in the short term. Various academic studies back this premise, showing that securities which outperform over the past 3 to 12 months often continue to outperform in the following months.

Charles Schwab CEO Emphasizes Momentum as Key Indicator

In a recent discussion on Yahoo Finance, Charles Schwab CEO Rick Wurster advised investors to focus on momentum as a simple yet effective way to assess stock performance.

Wurster suggested that one of the easiest technical indicators to watch is whether a stock is moving upward and staying above its long-term moving averages. He explained that such upward momentum typically signals underlying fundamental strength within the company.

“If a stock is going up and to the right, something good is fundamentally happening at the company,” Wurster noted, encouraging investors to keep their strategy straightforward by relying on momentum as a proxy for financial and operational health.

But Risks Remain as Unknowns Still at Play

That said, momentum investing isn’t risk-free, as investors also assume significant risk when the market corrects. Komal Sri Kumar, President of Sri-Kumar Global Strategies, cautioned investors during a June 26, 2025 appearance on CNBC that the current momentum driving U.S. equity markets may not be sustainable. Despite the market reaching record highs, he says that the market may see a 10% correction before year-end. To justify his view, he cited multiple macroeconomic and geopolitical risks that could disrupt the rally.

He emphasized that while market sentiment appears strong, it’s being propped up by a fragile balance of unresolved factors. These issues include tensions in the Middle East, uncertainty surrounding U.S. tariff policy, and concerns over the expanding fiscal deficit. While there is temporary calm in some of these areas, he warned that momentum-driven gains could reverse sharply if conditions worsen.

With those insights, let’s look at the 20 undervalued momentum stocks that are taking off.

Our Methodology

For shortlisting the 20 undervalued momentum stocks that are taking off, we began by using online stock screeners to find companies with a minimum 3-month share price return of 20%, a sign of strong recent momentum. From this initial pool, we filtered for stocks with a forward price-to-earnings (P/E) ratio of 15 or less to focus on names that still appear undervalued relative to earnings expectations. We then identified the top 10 stocks with the highest hedge fund ownership from this refined list by leveraging data from Insider Monkey’s Q1 2025 hedge fund database. Finally, we ranked these stocks in ascending order based on the number of hedge funds holding positions in them.

Note: All pricing and analyst rating data are as of market close on June 26, 2025.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

20 Undervalued Momentum Stocks That Are Taking Off

20. CleanSpark Inc. (NASDAQ:CLSK)

3-Month Price Change: 23.8%

Forward PE: 11.0

Number of Hedge Fund Holders: 23

CleanSpark Inc. (NASDAQ:CLSK) is one of the 20 undervalued momentum stocks that are taking off. In an industry where scale and speed are everything, CleanSpark has just hit a major milestone that investors shouldn’t overlook.

On Tuesday, June 24, CleanSpark announced that it had reached a total operating capacity of 50 exahashes per second (EH/s), meaning the company has achieved its mid-year 2025 target on schedule. The update caught the attention of H.C. Wainwright analyst Mike Colonnese who reiterated his bullish view on CleanSpark following the company’s update.

To benchmark this performance versus the last year, we note that throughout December 2024, the Company’s average hashrate was 35.52 EH/s, and it reported a hashrate of 39.1 EH/s at the end of the last year. Although, in comparison, the top player, MARA Holdings Inc. (NASDAQ:MARA), reported a hashrate of 58.3 EH/s at the end of May and held 49,179 bitcoin (BTC).

According to Colonnese, this milestone makes CleanSpark only the second public Bitcoin miner in their coverage to achieve this scale. The analyst emphasized that CleanSpark remains their top pick in the crypto mining sector.

He pointed to the company’s 145% year-over-year growth in hash rate since June 2024, which he attributes to a blend of solid organic expansion, targeted acquisitions, and disciplined capital allocation. In his view, as the company continues to expand its infrastructure and focus on capital efficiency, it appears well-positioned to build on its current momentum.

CleanSpark (NASDAQ:CLSK), is a pure-play Bitcoin miner with a portfolio of mining facilities across the United States.

19. Sonic Automotive Inc. (NYSE:SAH)

3-Month Price Change: 27.2%

Forward PE: 12.7

Number of Hedge Fund Holders: 26

Sonic Automotive Inc. (NYSE:SAH) is one of the 20 undervalued momentum stocks that are taking off. On June 16, BofA updated its outlook on Sonic Automotive, raising the stock’s price target from $80 to $94 while maintaining its Buy rating. The adjustment reflects a broader revision across its auto sector coverage, prompted by updated estimates and a forward shift in its valuation model to calendar year 2026.

According to the analyst, the slight downward revision in U.S. auto sales and production estimates for 2025 and 2026 accounts for potential headwinds, including tariff-related disruptions, supply chain risks around rare earth materials, and ongoing macroeconomic uncertainty. BofA now projects U.S. industry sales at 16.25 million units in 2025 and 16.9 million in 2026, with North American production expected at 15.75 million and 16.4 million units, respectively.

Despite these near-term challenges, the analyst believes most of the pressures should ease by late 2025 or early 2026. The revised target on Sonic Automotive reflects this measured optimism, incorporating the expected normalization of conditions over the medium term.

Sonic Automotive Inc. (NYSE:SAH) is one of the largest automotive retailers in the United States. Its services include the sale of both new and used cars and light trucks, sales of replacement parts, vehicle maintenance, warranty services, paint and repair services, and other aftermarket services.