A momentum investor likes to invest only when there's either high relative strength in the stock, or when the underlying business has been showing positive financial performance.
Momentum and inertia are terms from physics. A body at rest will remain at rest; a body in motion will remain in motion until acted on by another force.
Momentum investing borrows from that idea. A stock whose price is rising will continue rising. Hence, momentum investors often pick their stocks from the new high list. They differ from growth investors, in that growth investors believe that stock price follows earnings. They believe a stock can become overvalued when its share price far exceeds projected earnings growth. Conversely, momentum investors believe a stock price will continue to rise without limit.
Related Fool Articles
Related Community Blogs
Recent Mentions on Fool.com
- Travelers Companies Inc.'s Third-Quarter Earnings: 3 Key Takeaways
- 3 Things to Watch For When Proto Labs Inc Reports Earnings This Week
- FMC Technologies Boosts Its Profits, But Investors Still Want More
- Why Shares of The Coca-Cola Company Went Flat Today
- 3 Crucial Questions for Align Technology, Inc.
- Honeywell International: Must-Knows From the Q3 Conference Call