By Jacob Sonenshine

Momentum stocks can carry the market for only so long. So, we decided to hunt for stragglers that can catch up.

Make no mistake: we're in a bull market, having recovered from a nasty decline in early April triggered by the Trump tariffs. In just three months, the S&P 500 has hit another record high and is up 5% this year.

But momentum stocks have been the real winners.

The iShares MSCI USA Momentum Factor Exchange-Traded Fund, which tracks names that have had gains in the past six to 12 months and relatively low volatility in the past three years, is up 15% this year. Some of the momentum ETF's largest holdings -- Broadcom, Meta Platforms, Netflix, Palantir, and Visa are examples -- have powered the S&P 500 with their trillions in market capitalization.

This reveals there are many non-momentum names ready to punch higher. And the time is ripe: In the past three years, the momentum fund has now gained 76%, compared with the S&P 500's 62%.

That 14-point lead is about the highest in those three years, according to FactSet. When the spread gets into the low double digits, the momentum ETF usually drops for days to months -- in part because the stocks become too expensive, more than fully reflecting expected earnings for the long term. This is why we've started scouting for other stocks -- laggards.

Marvell Technology came up at a meeting of asset managers.

"Growth-dedicated portfolio managers who pitched stocks favored names that had recently lagged behind, like Marvell over those that have reached new highs," writes Adam Parker of Trivariate Research.

Four attention-getters are Lattice Semiconductor, Zoom Video Communications, PDF Solutions, and Lumentum Holdings. They're trading at lower P/Es versus the start of 2025, have projected earnings growth, and have average analyst ratings of Buy or Overweight. On Monday, Rosenblatt Securities analysts tagged the stocks as top picks for the second half of the year.

Marvell, a chip maker, might have more upside than the iShares Semiconductor ETF, which is up 10% this year and owns Broadcom, Nvidia, Micron Technology and Advanced Micro Devices.

Marvell's stock is down 32% this year and trades at 24.8 times analysts' expected earnings for the coming 12 months, down from a peak of 45 this year and about in line with the semiconductor fund. It has traded at about double the fund at times in the past three years.

The problem was twofold: The stock had been too expensive and the company's second-quarter sales guidance didn't satisfy lofty expectations. Then, management postponed its investor day, originally scheduled for this June.

Slower growth in Marvell's datacenter business -- AI chip sales -- is a concern, given the law of large numbers. This year's sales are expected to grow by 40%, to $8 billion. Sales next year, though, are expected to grow by only 20%, $9.7 billion, according to FactSet.

Now is clearly a good time to buy because Marvell's valuation is less demanding, but its growth outlook is still robust. The company has been one of the handful of chips makers powering the AI capabilities of Big Tech. It even has a five-year partnership with Amazon Web Services. AI investment is key. Amazon and the other tech titans have signaled they'll grow capital investments by double digits -- into the hundreds of billions annually.

Marvell, at the AI Customer Silicon Event, upped its forecast of its total addressable market for its specific products to $94 billion by 2028 from $75 billion. Plus, the company announced it has two new datacenter customers so it is becoming less dependent on Amazon.

"The expanding customer base should help reduce perceived AWS dependence concerns while the growing pipeline of 50+ opportunities worth $75B+ supports our positive long-term view," writes CFRA analyst Angelo Zino.

These are reasons to give these five stocks a look. They're worth digging into.

Now is the time to consider the laggards. Everything loses steam eventually, including momentum stocks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 30, 2025 14:57 ET (18:57 GMT)

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