Interested in momentum investing? Consider these stocks

Data are current as of the close on March 23, 2026; the author publishes 6‑month and 12‑month momentum portfolios and plans updates every 2–4 weeks. Portfolios are built from quantitative screens using metrics such as indicated dividend yield, 260‑day annualized volatility, P/E, P/CF, P/B, EV/EBIT, CF, FCF and market cap. The publication is presented as a starting point for research, with disclosures that the author may hold some positions and warnings about thinly traded names and companies undergoing corporate actions.

Analysis

Momentum portfolios are a flow-driven regime: when short-term institutional and retail flows align, dispersion and autocorrelation amplify returns for recent winners. That dynamic also raises liquidity risk — crowded winners tend to have higher loan balances and compressed borrow availability, so a triggering reversal can cascade through prime broker funding lines and intraday crosses.

Tail risks are classic and fast: momentum crashes are typically associated with broad mean-reverting rallies in laggards or sudden macro shocks that reset factor leadership. Expect worst-case drawdowns in the factor of order double-digit percent that can materialize within days and take months to recover; absence of explicit tail protection (vol, puts, or volatility targeting) materially increases realized losses.

Practical implementation should therefore be explicit about friction and sizing — prefer exchange-traded, liquid exposure to avoid single-stock liquidity traps, and overlay volatility-targeting to limit drawdowns. A conditional contrarian note: if breadth and macro beta rotate toward pro-cyclical growth (cheaper financing, falling rates), momentum regimes can persist and compress carry costs; conversely, if rates shock higher or credit lines tighten, the factor can flip rapidly, so hedges must be cheap, short-dated, and sized to tail events.

Key Decisions for Investors

• Long ETF pair: Buy MTUM (iShares Momentum ETF) and short VTV (Vanguard Value ETF) 3-9 month horizon. Size to target 4-6% portfolio volatility. Expect 3-8% relative upside if momentum regime persists; cap drawdown to ~8% by reducing notional or layering protection if market vol spikes above 20% VIX.
• Protective options hedge: Purchase a 3-month SPX 5/10% put spread (buy 10% OTM puts, sell 5% OTM puts) sized to cover 30-50% of momentum exposure. Cost ~40-120 bps of exposure depending on vol; limits downside to ~8-12% on funded exposure while keeping carry low if no crash occurs.
• Pair trade in single-name baskets: Long top 6-12 month momentum names via equal-weighted, liquid selection (min $2bn market cap, ADV > $50m) and short an equal vol-weighted basket of the cheapest decile by P/B. Rebalance every 4 weeks and cap position size per name at 1-1.5% NAV to avoid idiosyncratic liquidity risk. Target 6-12% annualized excess if trend continues; risk is concentrated idiosyncratic reversals and higher borrow costs on shorts.
• Risk-managed allocation: Implement volatility targeting for the momentum sleeve — scale exposure up when realized 60-day vol < 12% and cut by 30-50% if 10-day vol doubles. This reduces expected drawdown magnitude (historically halves tail losses) while preserving participation in upcycles.