In This Article:
Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here is one stock with the fundamentals to back up its performance and two not so much.
Two Momentum Stocks to Sell:
Vishay Intertechnology (VSH)
One-Month Return: +34.9%
Named after the founder's ancestral village in present-day Lithuania, Vishay Intertechnology (NYSE:VSH) manufactures simple chips and electronic components that are building blocks of virtually all types of electronic devices.
Why Do We Pass on VSH?
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Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.1% annually over the last two years
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Incremental sales over the last five years were much less profitable as its earnings per share fell by 25.4% annually while its revenue grew
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Free cash flow margin shrank by 15.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Vishay Intertechnology is trading at $15.34 per share, or 7.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including VSH in your portfolio, it’s free.
Delta (DAL)
One-Month Return: +31.8%
One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE:DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Should You Dump DAL?
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Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
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Projected sales decline of 1.4% for the next 12 months points to a tough demand environment ahead
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Push for growth has led to negative returns on capital, signaling value destruction
At $53.10 per share, Delta trades at 8.6x forward P/E. Check out our free in-depth research report to learn more about why DAL doesn’t pass our bar.
One Momentum Stock to Buy:
FTAI Aviation (FTAI)
One-Month Return: +18.6%
With a focus on the CFM56 engine that powers Boeing and Airbus’s planes, FTAI Aviation (NASDAQ:FTAI) sells, leases, maintains, and repairs aircraft engines.
Why Should You Buy FTAI?
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Market share has increased this cycle as its 44.9% annual revenue growth over the last two years was exceptional
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Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 73.8% outpaced its revenue gains
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Cash burn has become less severe over the last five years, showing the company is making some progress toward financial sustainability