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During the past decade, value investing achieved better performance than momentum investing. However, this does not mean that investors should always avoid investing in all momentum stocks. In fact, some momentum stocks are able to continue their good performance. For example, stocks with low PEG ratios are relatively undervalued by the market and have great potential to grow in the future.

Below we compiled a list of 20 U.S.-traded momentum stocks with low PEG ratios. All companies have at least a $10 billion market cap and PEG ratio lower than 1. They achieved the biggest gain over the past month. The market data is sourced from Finviz and hedge fund holdings are obtained from Insider Monkey, representing hedge fund holdings as of September 30th.

Ticker

Company

PEG

Monthly Return

CF

CF Industries Holdings, Inc.

0.54

31.79%

GILD

Gilead Sciences Inc.

0.87

27.05%

GM

General Motors Company

0.39

23.18%

MS

Morgan Stanley

0.92

22.03%

CAT

Caterpillar Inc.

0.7

21.82%

PCAR

PACCAR Inc.

0.94

21.23%

CMI

Cummins Inc.

0.7

20.86%

AMAT

Applied Materials Inc.

0.92

19.17%

MET

MetLife, Inc.

0.69

18.49%

PRU

Prudential Financial, Inc.

0.72

18.45%

HOT

Starwood Hotels & Resorts

0.79

17.35%

JPM

JPMorgan Chase & Co.

1

16.65%

NWSA

News Corp.

0.9

16.20%

WFC

Wells Fargo & Company

0.98

16.05%

MUR

Murphy Oil Corporation

0.81

15.71%

AA

Alcoa, Inc.

0.86

15.55%

AMP

Ameriprise Financial Inc.

0.9

15.25%

BTU

Peabody Energy Corp.

0.33

14.43%

HAL

Halliburton Company

0.44

14.14%

SPLS

Staples, Inc.

0.97

14.09%

CF Industries Holdings Inc is the best performing stock over the past month. It returned 31.79%, versus 8.12% for SPY in the same period. CF has a market cap of $11.2B and a low PEG ratio of only 0.54. Its P/E ratio is also low: only 9.42. CF Holdings is a manufacturer and distributor of nitrogen and phosphate fertilizer products. For the third quarter of 2011, the company reported net income of $331 million, up from $48 million for the same quarter in 2010. As of September 30, 2011, there are 35 hedge funds with CF positions. For example, Jim Simons' Renaissance Technologies had $71 million invested in CF. David Tepper's Appaloosa Management LP also had $67 million invested in this stock.

General Motors Company also performed very well in the past month. It generated a monthly return of 23.18%, outperforming the market by 15 percentage points. GM has a market cap of $39B and a low PEG ratio of 0.39. The global automotive company reported total revenue of $36.7B for the third quarter of 2011, up from $34.1B for the same period a year earlier. GM is quite popular among hedge funds. There are 71 hedge funds reported to own GM at the end of the third quarter. Among them, David Einhorn's Greenlight Capital had the largest GM position. The fund had nearly $300 million invested in GM at the end of September.

One mega-cap undervalued momentum stock is Wells Fargo & Company . It has a market cap of $159B and a PEG ratio of 0.98. The stock returned 16.05% during the past month, beating the S&P 500 index by 8 percentage points. The financial company reported net income of $4.1 billion for the fourth quarter of 2011, up from $3.4 billion for the same quarter in 2010. Wells Fargo is also very popular among hedge funds. As of September 30, 2011, there are 69 hedge funds with Wells Fargo positions in their 13F portfolios. For example, Warren Buffett's Berkshire Hathaway had $8.7 billion invested in Wells Fargo.

Other large-cap undervalued momentum stocks include JPMorgan Chase & Co, Caterpillar Inc, News Corp, MetLife Inc., Gilead Sciences Inc., Morgan Stanley, and Halliburton Company. Though these stocks generated double-digit returns over the past month, their low PE and PEG ratios still indicate that they are trading at discounts. We think these 20 stocks have great potential to grow in the future and we encourage investors to do some deep research on these undervalued momentum stocks for their portfolios.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.