Core Insights - The combination of price momentum and fundamental growth offers a robust framework for identifying stocks with both near-term opportunities and long-term potential [20][21] Price Momentum - Price momentum refers to the tendency of stocks that have performed well recently to continue performing well in the near term, driven by consistent upward price movement and strong trading volume [3] - Key indicators for price momentum include relative strength over three, six, and twelve-month periods, trading above key moving averages, increasing trading volume, and reaching new 52-week highs [8] Fundamental Growth - Fundamental growth encompasses metrics such as revenue expansion, earnings growth, improving profit margins, and strengthening competitive positions, which are essential for long-term value [4] - Indicators of fundamental growth include revenue growth above 15% to 20% year-over-year, earnings per share growing faster than revenue, and strong free cash flow generation [8] Combination Strategy - Stocks exhibiting both price momentum and fundamental growth indicate companies where market enthusiasm is supported by genuine business performance, enhancing the likelihood of sustained upward trajectories [5] - This dual filter helps avoid pitfalls associated with momentum stocks built on hype and undervalued stocks that lack improvement [6] Sector Performance - The strategy is particularly effective in sectors experiencing secular growth trends, such as technology, healthcare, and consumer brands [9] - During earnings season, companies that beat analyst expectations and raise future guidance often trigger momentum moves backed by improving fundamentals [10] Current Examples - **Palantir Technologies**: Revenue surged 48% year-over-year, exceeding $1 billion for the first time, with a full-year guidance raised to 45% growth, reflecting strong adoption of AI tools [12] - **Lam Research Corp.**: Reported annual revenue of over $18 billion, representing 23.68% growth, with a stock surge of 105% year-to-date, driven by demand in the semiconductor industry [14] - **Amphenol Corp.**: Achieved nearly $19 billion in trailing 12-month revenue with 48.9% year-over-year growth, demonstrating strong performance in AI-related infrastructure [17] - **Robinhood Markets**: Revenue growth accelerated to 45% year-over-year, with a stock surge of over 180% year-to-date, reflecting a successful pivot to a diversified financial services provider [19]

The recent pullback is offering even the smallest investors an opportunity to get in on the best AI stocks. Artificial intelligence (AI) stocks were the driving force behind the S&P 500's impressive performances in 2023 and 2024. Unfortunately, they've also been the biggest drags on stock market returns in 2025. While many of the top AI stocks have dropped in price, not every single one of them is worth investing in right now. However, the sell-off has provided smart investors with a lot more attractive ent ...