When stocks are on a roll, investors have a tough call to make: can the momentum continue or have they missed out on all the fun?

Defence Investment

Few would describe BAE Systems (LSE: BAE) as a defensive investment. Over the last five years it has been a growth marvel, rising nearly 60%, which is 10 times the 6% “enjoyed” by the rest of the FTSE 100. Over the last six months, it’s up 16%. Life’s a blast at BAE right now.

It has endured a tough time for the defence sector, with governments cutting back on spending in the wake of the financial crisis, until geopolitical fears forced them to think again. BAE has been adapting to new challenges such as cyber security, but this sector accounts for less than 10% of its earnings. Some have argued that traditional weaponry such as submarines, aircraft carriers, tanks missiles are obsolete in the age of terror, but tension in the South China Sea and Ukraine suggest that this prediction, like the supposed end of history, will prove wide of the mark.

BAE Systems’ earnings per share (EPS) are forecast to fall 3% this year but should revive to a more gung-ho 7% in 2017. Today’s entry point of 12.9 times earnings offers some shelter, as does the current yield of 4%, covered 1.9 times. War may be good for “absolutely nothing” but humans still can’t appear to live without it. That is bad news for world peace but positive for BAE. 

Glencore Holding

Mining stock Glencore (LSE: GLEN) has shot up like a laser-guided, growth-seeking missile, rising 138% in just three months. Yet it still trades 43% lower than one year ago, which only emphasises the extent of last year’s implosion. Commodity sector sentiment has rebounded as the Chinese authorities hose down talk of a hard landing with yet another blast of stimulus, and markets are acting as if this time it’s sustainable. We’ll see. A stock this volatile could move in any direction from here.

Forecast EPS looks stunning: growth of 84% is expected in 2017. Markets are being cheered by cost-cutting, debt restructuring and lucrative disposals, including its $2.5bn agricultural unit stake. Glencore remains cash generative and boasts $15bn of available liquidity, despite no dividend. Future momentum rests entirely on where commodity prices go next.

Right Royal

Most investors see Royal Mail (LSE: RMG) as an income play but its share price has put on a spurt lately, rising 16% over the last three months. Today’s valuation of 11.46 times earnings is still tempting, however, while it delivers a welcome yield of 4.31%. Some are bullish on its growth prospects, Investec has a buy price of 580p, which would suggest almost 20% upside on today’s 487p.

Royal Mail isn’t without risks, as we wait to see whether its European operations parcel delivery division can grow fast enough to offset the anticipated decline in letter sending (although my doormat suggests that junk mail is alive and well). Steady EPS growth of 2% and 3% over the next couple of years point to a steady future and with the dividend covered twice there’s scope for rising payouts. Continued forward motion seems likely, although momentum may slow.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.