Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here are two stocks with lasting competitive advantages and one not so much.

One Momentum Stock to Sell:

Magnachip (MX)

3-Month Return: +5.2%

With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE: MX) is a provider of analog and mixed-signal semiconductors.

Why Do We Think MX Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 20.5% annually over the last five years
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 45.3% annually, worse than its revenue
3. Free cash flow margin dropped by 23.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Magnachip is trading at $4.67 per share, or 0.7x forward price-to-sales. Read our free research report to see why you should think twice about including MX in your portfolio.

Two Momentum Stocks to Watch:

Dutch Bros (BROS)

3-Month Return: +48.5%

Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE: BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.

Why Should BROS Be on Your Watchlist?

1. Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
2. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

Dutch Bros’s stock price of $80.76 implies a valuation ratio of 149.6x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.

Hershey (HSY)

Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE: HSY) is an iconic company known for its chocolate products.

Why Is HSY Interesting?

1. Healthy operating margin of 24.4% shows it’s a well-run company with efficient processes, and its profits increased over the last year as it scaled
2. Strong free cash flow margin of 15.5% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets

At $172.71 per share, Hershey trades at 24x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.