'Momentum investing' is the concept that if you invest in businesses that are growing, you're likely to do well because that business will just keep going.
Not every business will turn out like a2 Milk Company Ltd (Australia) (ASX: A2M) but there's enough examples out there to show that it can work.
A good analogy is that a student that has done incredibly well in college isn't likely to 'flunk out' straight after graduating, they're likely to keep on doing well into the future.
I think the following shares have great futures:
Altium Limited (ASX: ALU) has hit new highs by reaching $13.50 yesterday. The electronic PCB software company has benefited from investor sentiment growing in the few months since its annual report which was released in August.
Management are predicting that Altium can double its revenue to $200 million over the next few years. If it achieves this then the current price could look good value, even if the shares are trading at 38x FY18's estimated earnings.
BWX Limited (ASX: BWX) has almost tripled its share price since it first listed on the ASX a couple of years ago. Impressive growth of its Sukin products has made investors sit up and take notice.
BWX management have said that the current acquisition phase is over. It's possible that organic growth could seriously pick up now that the business has two major brands to grow in the US. It should also allow for Sukin to be sold into US using the same distribution channels.
Costa Group Holdings Limited (ASX: CGC) has come off the boil a bit, but the share price has still doubled in under a year. Demand for fresh food should continue growing around the world with population growth, combined with a desire for healthier eating habits.
In the coming years it could truly become a global food player with farms in Australia, China and Morocco.
Challenger Ltd (ASX: CGF) is riding on the back of the growing number of baby boomers reaching retirement age. The lifetime annuity sales Challenger reports each quarter is growing at around 50% compared to the prior corresponding year.
I'm particularly excited by Challenger growing in the Japan financial market, which has a much larger population and more assets to invest. The Japanese have been living in a low-interest economy for a very long time and Australian interest rates are attractive.
Foolish takeaway
I think both Challenger and BWX would be good buys at today's prices. The Altium share price has probably gotten a little ahead of fair value and the Costa share price may keep falling, so I'd wait to see if it will keep going downwards before buying.
