The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here is one stock we think lives up to the hype and two not so much.
Two Momentum Stocks to Sell:
American Eagle (AEO)
One-Month Return: +56.9%
With a heavy focus on denim, American Eagle Outfitters (NYSE:AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.
Why Does AEO Worry Us?
- 2.2% annual revenue growth over the last three years was slower than its consumer retail peers
- Lack of new stores puts a ceiling on its growth and reflects a focus on optimizing sales at existing locations
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
American Eagle’s stock price of $27.45 implies a valuation ratio of 17.1x forward P/E. To fully understand why you should be careful with AEO, check out our full research report (it’s free for active Edge members).
Norwegian Cruise Line (NCLH)
One-Month Return: +21.5%
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE:NCLH) is a premier global cruise company.
Why Should You Sell NCLH?
- Performance surrounding its passenger cruise days has lagged its peers
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Norwegian Cruise Line is trading at $21.60 per share, or 8.4x forward P/E. If you’re considering NCLH for your portfolio, see our FREE research report to learn more.
One Momentum Stock to Watch:
Ulta (ULTA)
One-Month Return: +19.4%
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ:ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
Why Do We Like ULTA?
- Store expansion strategy is justified by its healthy same-store sales
- Comparable store sales rose by 2.6% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Industry-leading 32.3% return on capital demonstrates management’s skill in finding high-return investments
At $594.05 per share, Ulta trades at 21.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.