How do you determine if a stock will rise? Forget about company valuations or earnings growth potential…just check if the stock’s price has been rising in the recent past.

Validea’s “Quantitative Momentum” portfolio (based on Wesley Gray and Jack Vogel’s Quantitative Momentum) has trounced its other funds this year, up 55.7% through August 26 versus 18.1% for the S&P 500.* Over the past decade, the strategy has returned 16.5% annualized versus 10.9% for the index.

Stocks whose prices have risen the most over the past two to 12 months are highly likely to keep going up. It is also important that the stock price climbs each month with some consistency ­during the same period. This approach works because investors underestimate the effects of good news on a stock.

Caveat: Quantitative momentum outperforms when market leadership and macroeconomics are stable for extended periods, as they have been in 2023 and 2024. It falters when investors are rapidly shifting from growth to value stocks or large-caps to small-caps…or if inflation keeps rising and falling.

Top quantitative momentum stocks…

Costco (COST), the iconic big-box retailer. Recent share price: $892.51.

H&R Block (HRB), the tax-preparation services company. Recent share price: $63.80.

Howmet Aerospace (HWM), manufacturer of engineered metal components for the airline and defense industries. Recent share price: $96.64.

Don’t want to invest in individual stocks? Consider an actively managed ETF that uses a similar strategy…

Alpha Architect US Quantitative Momentum ETF (QMOM). ETFSite.AlphaArchitect.com

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