Momentum in the stock market is an interesting topic. It’s something FTSE 250 constituents easyJet (LSE: EZJ) and Games Workshop (LSE: GAW) have gained over the last 12 months.
Off the bat, I want to make it clear I wouldn’t buy a stock solely on a rising share price. In the short term, momentum and positive investor sentiment can lead to a stock surging, offering potential quick gains. But that’s not for me.
I buy for the long term. I’m referring to companies that have steadily been gaining traction that, in my opinion, is justified. Speaking of that, do easyJet and Games Workshop fit the bill?
easyJet
Let’s start with easyJet. In the last year, the stock’s climbed 12.7%. The FTSE 250, by comparison, is up 5.5%. In the last six months, easyJet stock’s jumped 22%.
It’s been a difficult few years for the company. But things seem to be on the up. It has made a strong recovery following the pandemic. For Q1 2024, passenger growth rose 14% year on year. It’s also expected the months ahead will prove to be fruitful for budget airlines.
That’s according to travel data firm OAG, which claims European airlines will have 817.5m seats available between April and October, the highest on record.
That said, the times ahead won’t exactly be a smooth ride. The travel industry’s incredibly volatile. Conflict can impact it, as we’ve seen most recently with the ongoing situation in the Middle East. There are other factors as well, such as oil prices.
Games Workshop
Like its counterpart, Games Workshop stock has also impressed lately. In the last 12 months, it’s risen 15.3%. Zooming out, it’s returned 243.4% over the previous five years.
I’m an existing shareholder but I plan to own the stock, ideally for as long as possible. There’s one main reason for that.
The business is an industry leader. When it comes to competition, Games Workshop is far ahead of the pack. That gives it a strong competitive advantage. Sales continuing to grow for the last decade is proof of this.
Nevertheless, management doesn’t plan on slowing. It’s now expanding its Warhammer universe into TV and film content. On top of the growth predicted for the board game market in the years ahead, this should help grow its customer base.
There are a few issues. The stock could be viewed as expensive, trading on trailing earnings of 23.5 times. Inflation has also squeezed margins and forced it to up its prices.
However, I’m comfortable paying for quality. With Games Workshop, I’m confident I’m getting just that.
Momentum or miss?
So will these stocks keep trending upwards, or should I give them a miss? easyJet will soon be back as part of the FTSE 100 and, in my opinion, it’s easy to see why. I’m hopeful it’ll continue with its strong recovery.
Similarly, I like Games Workshop and I’m bullish on its long-term outlook as it continues to grow and expand.
Both businesses will also benefit from an uplift in spending as interest rates are cut in the months to come. If I had the cash, I’d happily buy them today.
