Stop Losing Money — 5 Stocks Actually Going Up

Key Concepts

• Momentum Investing: A strategy of buying stocks that have shown an upward price trend over the last 3–12 months, based on the premise that these trends tend to persist.
• Falling Knife: A colloquial term for a stock that is rapidly declining in price; the speaker advises against "catching" these (buying them) simply because they are cheaper.
• Operational Leverage: The ability of a company to increase its earnings at a faster rate than its revenue growth through efficient cost management.
• Top-Down Analysis: An investment approach that starts by analyzing the broader economy and market indices before drilling down into specific sectors and individual stocks.
• Oligopoly: A market structure dominated by a small number of large sellers (e.g., the telecom industry).

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1. Market Overview and Investor Mistakes

Joseph Hogue highlights that while market sentiment is currently dominated by geopolitical tensions (specifically the Iran conflict) and inflation fears, investors are making a critical error by ignoring strong market fundamentals.

• Earnings Growth: S&P 500 companies are projected to see earnings growth of approximately 18% this year, which is historically rare and typically precludes a recessionary environment.
• The "Falling Knife" Fallacy: Investors often "double down" on losing stocks, hoping to lower their cost basis. Hogue argues this is a psychological trap that often leads to holding assets that are declining for valid fundamental reasons, potentially leading to bankruptcy or significant capital loss.

2. The Momentum Strategy

Hogue advocates for "chasing winners" rather than "chasing losers."

• Research Evidence: Citing UCLA research, Hogue notes that stocks that outperformed over the previous 3–12 months tend to continue that performance. A portfolio based on 6-month momentum historically outperformed broader indices by 1%.
• Logic: If a stock has sustained momentum, it usually indicates a positive shift in the business model or news cycle that is likely to persist.

3. Recommended Momentum Stocks

Hogue presents five stocks that demonstrate strong fundamentals and relative strength despite recent market volatility.

Software Sector

• Cloudflare (NET): Up 15% (1-month) and 78% (1-year). It is positioned to benefit from the shift to usage-based revenue models and edge computing. It currently secures 20% of the global internet.
• DataDog (DDOG): Up 6% (1-month) and 17% (1-year). Hogue identifies it as a potential "next Palantir" due to its new partnership with Sakana AI, which integrates AI capabilities into its data operations.
• Palo Alto Networks (PANW): Up 3% (1-month). Despite being down 6% for the year, it is a leader in the cybersecurity space. Hogue argues that cybersecurity is a "non-cuttable" budget item for enterprises, and AI actually increases the demand for these services. It maintains strong operational leverage with 15–20% operating margins.

Healthcare Sector

• Thermo Fisher Scientific (TMO): Down 3% (1-month) but outperforming its industry. It is a $182 billion giant in life sciences and diagnostics. It demonstrates excellent operational leverage, converting 5.2% sales growth into 7.3% earnings growth. It is currently trading at a 28% discount relative to its 5-year average price-to-sales ratio.

Telecom Sector

• AT&T (T): Up 1% (1-month) and 2% (1-year). Hogue views this as a "recession-proof" play. While revenue growth is modest (2.3%), the company effectively leverages this into 8.5% earnings growth. It offers a 3.9% dividend, providing income while waiting for market volatility to subside.

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4. Synthesis and Conclusion

The core takeaway is that investors should shift their focus from "bargain hunting" in declining stocks to identifying high-quality companies that exhibit both strong fundamentals and positive price momentum. By prioritizing earnings growth and operational leverage, investors can navigate market volatility more effectively. Hogue emphasizes that in the current environment, sectors like cybersecurity and essential healthcare are particularly resilient, and companies that can successfully integrate AI into their business models—like Cloudflare and DataDog—are well-positioned for continued growth.