Joe Terranova on the quantitative approach to the JOET ETF that identifies winners like Palantir early

Joe Terranova's Virtus Terranova U.S. Quality Momentum ETF (JOET), a rules‑based equal‑weighted strategy that screens the 500 largest U.S. companies for 12‑month total‑return momentum, trims to the top 250 and then scores the top 125 on ROE, debt‑to‑equity and three‑year sales growth, has outperformed peers—rising 10.9% year‑to‑date versus 6.8% for the Invesco S&P 500 Equal Weight ETF—while being rebalanced quarterly. The methodology has delivered early exposure to winners (Terranova says he bought Palantir near $16.76 before it traded around $173 and rallied roughly 129% in 2025) and disciplined exits (the strategy liquidated Tesla on Halloween), underscoring how momentum paired with quality can capture alpha and remove emotional decision‑making. Terranova plans to extend the same rules to small‑cap and European universes; JOET carries a 0.29% expense ratio and about $240 million in AUM, positioning it as a potential core equity sleeve or shock absorber for institutional portfolios.

Analysis

Joe Terranova's Virtus Terranova U.S. Quality Momentum ETF (JOET) has returned 10.9% year-to-date versus 6.8% for the Invesco S&P 500 Equal Weight ETF (RSP), with the fund screening the 500 largest U.S. companies for 12-month total-return momentum, narrowing to the top 250, scoring on return on equity, debt-to-equity and three‑year annualized sales growth, and holding the top 125 equal-weighted names with quarterly rebalances; expense ratio is 0.29% and assets under management are about $240 million.

The rules-based process produced early exposure to Palantir (Terranova says he bought near $16.76 and the stock traded around $173, a roughly 129% move in 2025) and disciplined exits such as the strategy liquidating Tesla on Halloween after revenue growth flattened, illustrating how pairing momentum with quality can both capture winners and force timely sells.

The approach positions JOET as a potential core equity sleeve or "shock absorber" that removes discretionary emotion, but it also carries momentum-specific concentration risk and the possibility of underperformance in mean-reversion or value-driven environments; quarterly rebalancing mitigates but does not eliminate intraperiod volatility. Investors should also note Terranova's intent to extend the rules to small-cap and European universes, which could change liquidity, turnover and performance dynamics as the strategy scales.

Key Decisions for Investors

• Consider a modest tactical allocation to JOET given its 10.9% YTD outperformance versus RSP and its disciplined momentum+quality rules-based process, but avoid making it the sole core equity exposure
• Monitor quarterly rebalance dates and turnover to manage intraperiod momentum drawdown risk and be prepared for concentrated bets in names like PLTR
• Track AUM (~$240m), expense ratio (0.29%) and disclosures around the planned small-cap and European expansions because scaling can alter liquidity and performance characteristics
• Complement JOET exposure with diversification or hedges to protect against momentum reversals and sector-specific shocks