1 Momentum Stock on Our Buy List and 2 Facing Headwinds
Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. On that note, here is one stock with lasting competitive advantages and two not so much.
Two Stocks to Sell:
PubMatic (PUBM)
One-Month Return: +6.6%
Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.
Why Do We Pass on PUBM?
- Platform has low switching costs as its net revenue retention rate of 96% demonstrates high turnover
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 18.4 percentage points over the next year
At $17.44 per share, PubMatic trades at 2.6x forward price-to-sales. Read our free research report to see why you should think twice about including PUBM in your portfolio.
Enact Holdings (ACT)
One-Month Return: -3.6%
Playing a critical role in helping first-time homebuyers access the housing market, Enact Holdings (NASDAQ:ACT) provides private mortgage insurance that enables lenders to offer home loans with lower down payments while protecting against borrower defaults.
Why Do We Avoid ACT?
- Insurance offerings faced market headwinds this cycle, reflected in stagnant net premiums earned over the last five years
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 5.8% annually
Enact Holdings is trading at $47.91 per share, or 1.2x forward P/B. If you’re considering ACT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Meta (META)
One-Month Return: +31.3%
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
What Makes META Stand Out?
- 24.4% annual increases in its average revenue per user over the last two years show its platform is resonating with power users
- Excellent EBITDA margin of 60.5% highlights the efficiency of its business model, and its profits increased over the last few years as it scaled
- Share buybacks catapulted its annual earnings per share growth to 51.1%, which outperformed its revenue gains over the last three years
Meta’s stock price of $734.01 implies a valuation ratio of 12x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.