Excess Returns
The Market's Best-Kept Secret | Travis Prentice on Momentum's Surprising Edge
Apr 30, 2025
In this conversation, Travis Prentice from Informed Momentum Company shares his nearly three decades of expertise in momentum investing. He clarifies the distinction between momentum and growth investing and dispels common myths surrounding momentum strategies. Listeners learn about the mechanics of cross-sectional momentum, how to optimize portfolios with dynamic versus continuous momentum, and the impact of passive investing on stock valuations. Travis also discusses risk management in momentum investing and the advantages of combining it with other factors for better performance.
50:44
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Quick takeaways
- Momentum investing is dynamic, requiring constant adjustments based on relative performance rather than historical successes, differentiating it from growth investing.
- Integrating price momentum with improving fundamentals can create more resilient investments, emphasizing the importance of underlying business health alongside performance metrics.
Deep dives
The Nature of Momentum Investing
Momentum investing is characterized by its dynamic nature, where what is currently outperforming dictates investment decisions. This means that a stock like NVIDIA, which may have exhibited significant performance over a period, may not always feature in a momentum portfolio if its relative strength diminishes or other stocks outperform. Investors often misconstrue momentum, believing that past successes ensure future inclusion, but momentum portfolios are actually rebalanced based on a stock's recent achievements compared to its peers. Thus, understanding momentum involves a keen awareness that it is continuously shifting and is heavily reliant on the latest performance metrics.
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