Most traders already know concerning the “Dividend Aristocrats,” a category of shares recognized for steadily rising their dividend funds over time.
However what concerning the “Momentum Aristocrats?”
Because the identify implies, these shares can maintain excessive ranges of momentum over lengthy durations of time. They usually can come from nearly any business…
Just like the California-based contractor that whose shares rocketed up 85.5% between March and Could of this 12 months…
Or the American chipmaker whose shares climbed 43% between Could and July…
Or the Pennsylvania-based financing firm that locked in a 33% achieve throughout final 12 months’s vacation season.
These shares are virtually invisible to the common investor. But when you recognize the place and learn how to discover them, the potential upside is huge.
One historic research discovered {that a} technique centered round these Momentum Aristocrats beat the overall return of the S&P 500 300-to-1 over the long run. Right here’s how they do it…
Blueprint for a Momentum Aristocrat
Sturdy momentum is clearly a main issue for these shares. But it surely’s removed from being the solely issue.
Momentum, as a inventory market phenomenon, is often extra short-lived than many different components.
Only a few shares can maintain onto market-beating momentum for greater than a 12 months … and those that do could be susceptible to vicious post-bubble busts.
My analysis exhibits that it’s extremely uncommon for a inventory to take care of a excessive Momentum score for greater than 12 months. Most frequently, it doesn’t final for much longer than two months.
And shares that solely have robust Momentum scores are largely pushed by hypothesis and hype — not rock-solid enterprise fashions.
That’s why my Infinite Momentum Alert system insists on extra than simply robust momentum.
It screens and ranks on High quality and Worth metrics as properly. And doing so helps us discover shares with sustainable momentum … an extremely necessary trait when establishing an efficient market-beating portfolio.
Consider it like this…
A pure-momentum portfolio is sort of a ’71 Ford Pinto with a rocket strapped to the roof. It’ll go quick … as soon as. And also you wouldn’t need to be the one behind the wheel for that, both.
However a balanced portfolio, specializing in high quality, worth and momentum? That’s like a brand-new, top-of-the-line Porsche 911. You possibly can run that child for 200,000 miles and doubtless much more. And it’ll nonetheless fly previous the whole lot else on the highway.
I do know I’m not alone in preferring the Porsche over the Pinto.
We merely can’t count on a inventory with out robust fundamentals — what the High quality and Worth components cowl — to persistently beat the market. All of the hype on the planet isn’t sufficient to prop up a horrible, money-losing firm.
So what does it appear like when a inventory has top quality, excessive worth, and robust momentum?
A Minimize Above the Relaxation
In March of this 12 months, I added a California-based contractor to my Infinite Momentum Alert portfolio.
The inventory was already on a roll, with momentum operating full throttle and excessive scores in each high quality and worth.
And regardless of already making large positive aspects on the 12 months, the expansion runway was nonetheless lengthy for the corporate.
With lower than $1 billion market cap, it was firmly in small-cap territory with a good better probability of beating the market.
Certain sufficient, the inventory turned a Momentum Aristocrat earlier than our eyes. And in lower than three months our place reached a near-triple digit achieve.
We’ve since bought the inventory because it now not met our strict requirements. However on Thursday, I’ll be including 10 extra potential Momentum Aristocrats to the portfolio. Click on HERE to get entry.
To good earnings,
Adam O’Dell
Chief Funding Strategist, Cash & Markets
