Investors favoring a short horizon and possessing a fair amount of risk tolerance sometimes look to stocks that have already been trending upward in an effort to capitalize on their momentum. This investment strategy often looks more toward price movement than it does the fundamentals of a company. However, some investors feel most secure in a momentum investment when they believe the firm's business is solid as well.

The S&P 500 has rallied considerably in the last year, rising by 32.3% in the 12 months through November 2024. This broad market movement has helped to lift some stocks that otherwise might not have performed as well, though the real standouts have far outpaced this level of growth during that timeframe. These are some potential momentum plays heading toward the start of the new year.

Monopar: Promising Agreement With Alexion

Monopar Therapeutics Inc. (NASDAQ: MNPR) is a biopharma firm that develops cancer treatments, including its leading candidate, Validive. What has drawn investor attention most recently, however, is its strategic agreement with AstraZeneca plc (NASDAQ: AZN) subsidiary Alexion to develop and commercialize ALXN-1840 as a treatment for the genetic disorder Wilson's disease. ALXN-1840 has recently shown promising Phase III clinical trial results.

For small biotech companies like Monopar, having sufficient cash reserves to sustain operations is critical. In its latest earnings report, Monopar said it expects to have cash to operate until at least the first half of 2026. Net losses for the quarter narrowed compared to the prior-year period. Shares of MNPR are up a whopping 1,223% in the year leading up to November 26, 2024.

Investors considering Monopar should keep a close eye out for announcements about further development of ALXN-1840. Any updates on its MNPR-101 line of oncology products, all of which are either in the pre-clinical or Phase I stages of testing, would also support the company's future stability.

MicroStrategy: Increasing Focus on Bitcoin

Business intelligence and cloud computing company MicroStrategy Inc. (NASDAQ: MSTR) has developed a reputation as a vanguard holder of Bitcoin. With the world's largest corporate holdings of the leading cryptocurrency, the firm is positioning itself to buy up even more thanks to an ambitious $42-billion plan to sell shares and take on new debt.

Of course, MicroStrategy also retains its core enterprise software business as well, although that most recently led to a net loss of more than $340 million in the latest quarter. MicroStrategy is thus becoming a type of Bitcoin play for investors who are not keen to buy up tokens themselves. MSTR shares are up 670% in the year leading to November 26, 2024, and analysts believe the stock still has almost 36% upside potential.

Sezzle: Impressive Fundamentals, But Will the Rally Sustain?

Sezzle Inc. (NASDAQ: SEZL) operates a buy-now-pay-later payment platform that has seen massive success in recent quarters—shares of the company are up over 1,900% year-to-date. The company's recent earnings show that this momentum appears to be continuing, as Sezzle reported 71% year-over-year revenue gains, nearly 15% subscriber growth quarter-over-quarter, a successful share buyback program, and more in the latest quarter.

The question for investors is whether Sezzle has peaked or if there is room for further growth. The firm's fundamentals appear strong alongside its growing brand loyalty, particularly given that it has seen an increase in consumer purchase frequency on top of the metrics listed above. However, analysts fear that the company's share price may have spiked too quickly, with three analysts calling for a consensus price target more than 45% below current levels. Investors will have to decide whether they feel the company's business supports further growth at this time.

Timing the Market

In momentum investing, timing the market is key, although this is a notoriously difficult project. Investors who identify a stock that may have already exhausted its momentum by climbing too high or too fast might even consider making a bet against continued price increases via short sales, even if the company's long-term prospects could lead to price growth over an extended time. Investors should also be aware of the risk of buying a momentum stock and holding on to it for too long, as it is also essential to plan for an exit strategy.