2 Momentum Stocks with Solid Fundamentals and 1 Facing Headwinds

The stocks featured in this article have all approached their 52-week highs. When these price levels hit, it typically signals strong business execution, positive market sentiment, or significant industry tailwinds.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. Keeping that in mind, here are two stocks we think live up to the hype and one not so much.

One Stock to Sell:

3M (MMM)

One-Month Return: +4.6%

Producers of the first asthma inhaler, 3M Company MMM is a global conglomerate known for products in industries like healthcare, safety, electronics, and consumer goods.

Why Are We Out on MMM?

• Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
• Earnings per share have contracted by 2.2% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
• Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

3M is trading at $159 per share, or 19.8x forward P/E. Dive into our free research report to see why there are better opportunities than MMM.

Two Stocks to Watch:

Palo Alto Networks (PANW)

One-Month Return: +9.8%

Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks PANW provides AI-powered cybersecurity platforms that protect organizations’ networks, clouds, and endpoints from sophisticated threats.

Why Are We Fans of PANW?

• 22% annual revenue growth over the last five years surpassed the sector average as its software resonated with customers
• Software platform has product-market fit given the rapid recovery of its customer acquisition costs
• PANW is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

At $210.25 per share, Palo Alto Networks trades at 14.1x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

MercadoLibre (MELI)

One-Month Return: -4.7%

Originally started as an online auction platform, MercadoLibre MELI is a one-stop e-commerce marketplace and fintech platform in Latin America.

Why Will MELI Beat the Market?

• Unique Active Buyers have grown by 20.7% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
• Platform’s growing usage and its ability to increase user spending by 15.5% annually showcases its high switching costs
• Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety

MercadoLibre’s stock price of $2,261 implies a valuation ratio of 22.6x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return).

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