Josh Brown, counting on a new momentum strategy, thinks investors want more than index funds

Josh Brown launched Porterhouse, a rules-based momentum separately managed account built to hold 58 of the market's strongest stocks and avoid weakening names by moving to cash when sell rules are triggered. The strategy targets earnings growth and persistent share-price strength, with AI-linked winners like Ciena among its notable performers; none of the Magnificent Seven are in the current portfolio. The launch reflects continued demand for selective, momentum-driven exposure alongside low-cost passive funds.

Analysis

This is less a direct endorsement of momentum than a signal that capital is still migrating from broad beta into curated beta. The second-order effect is that a small set of non-indexed winners can keep outperforming even when the mega-cap complex cools, because allocators are now paying for selection, not just exposure. That creates a favorable setup for mid/large-cap beneficiaries of AI capex that are not already fully owned, with Ciena the clearest example: it sits in the “picks-and-shovels” lane where earnings revisions can stay positive even if headline AI sentiment gets choppier.

The notable underappreciated risk is that momentum strategies become self-reinforcing until they don’t. If the market rolls over in a factor rotation, a rules-based vehicle that can go to cash may actually amplify downside in the stocks it sells, because there is no forced re-entry mechanism after rebounds. That makes the signal most relevant over the next 1-6 months, not as a secular endorsement of the current leaders; the exit condition is not fundamental deterioration alone, but deceleration in price trend plus slower estimate revisions.

The contrarian read on AAPL and NVDA is that they are likely to remain core holdings in passive portfolios but may increasingly underperform in any “best-stocks” selection universe because expectations are already crowded and the marginal buyer is less incremental. In contrast, the winner set may broaden to industrial and networking names tied to AI infrastructure, where consensus ownership is still relatively low. The real opportunity is not chasing the obvious winners, but positioning for the next wave of earnings revision breadth as market leadership rotates beneath the surface.

Key Decisions for Investors

• Long CIEN vs. short NVDA basket as a 3-6 month relative-value expression of AI infrastructure breadth; target is further multiple expansion in the networking layer if AI capex remains durable, with NVDA serving as the crowded-ownership hedge.
• Add a tactical long in CIEN on any 5-8% pullback over the next 2-4 weeks; risk/reward favors continuation if earnings revisions stay positive, but trim if the stock loses momentum versus semis and hyperscaler proxies.
• Underweight AAPL in momentum-focused sleeves for the next 1-2 quarters; it remains a passive-core name, but it is less attractive in a strategy that explicitly rewards trend acceleration and estimate revisions.
• Use options to express caution on the crowding risk: buy 3-4 month puts on a momentum basket or a liquid proxy like MTUM on sharp strength, looking for a volatility expansion if leadership narrows and the factor de-risks.
• Keep cash optionality ready in fast-moving names; the highest-probability failure mode here is a 10-15% drawdown in crowded winners over days to weeks, where having dry powder is more valuable than staying fully invested.