Amid the current market volatility that is being driven largely by concerns over the resurgence of COVID-19 cases and rising inflation, we think it could be wise to bet on stocks that have gained momentum that they are expected to maintain for some time. This could be the case with ABB (ABB), Eaton (NYSE:ETN), and Allied Motion (AMOT). They could be solid picks given their uptrend over the past few months and the fundamental strength to maintain it in the near term. Let’s discuss these names.Even though solid second-quarter corporate earnings reports have been helping the major stock market indexes hover near their all-time highs, investors’ concerns over the pace of economic recovery due to the resurgence of COVID-19 cases have fostered market volatility. In addition, the Federal Reserve recently indicated its willingness to reduce its asset purchases before the end of the year.
Several stocks are currently trading at sky-high valuations, and a high inflation environment could cause them to decline in price. However, turning to momentum investing could be rewarding now because stocks that have managed to gain momentum over the past few months might be able to maintain it in the near term, irrespective of short-term fluctuations by the broader market. Investors’ increasing interest in momentum stocks is evident in the iShares MSCI USA Momentum Factor ETF’s (MTUM) 2.8% returns over the past month.
ABB Ltd (ABB), Eaton Corporation plc (ETN), and Allied Motion Technologies Inc. (NASDAQ:AMOT) have achieved decent momentum over the past few months, and their fundamental strength should allow them to keep rallying. So, we think it could be wise to scoop up these three stocks now.