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A "momentum" stock fulfils criteria relating to the upward trend of its stock, its positive variations over the last few months and the upward revisions of future results by analysts.
We are interested in stocks that have outperformed the market over the past 6 and 12 months and that have bullish earnings and revenue revision patterns, assuming that analysts are conservative in their revisions
.
The momentum factor has historically outperformed markets over the long term.
The index manufacturer MSCI has created factor indices based on these different criteria. We can observe that the MSCI World Momentum Index outperforms its benchmark: the MSCI World, generating an outperformance of 3.17% per year since 1999 compared to the MSCI World Index
.
Source: MSCI
Let's look at the performance each year (from 2000 to 2020) of the various MSCI factors. The momentum factor outperforms in a bull market and underperforms in a bear market.
This performance is not at the expense of risk (risk is measured here by volatility) since the MSCI World Momentum index generates a better annualized performance for equivalent volatility (15.9% per year compared with 15.7% for the MSCI World
).
Momentum stocks generally perform better in phases of economic expansion (in orange on the chart below):
Source: MSCI
Our team has created a list of stocks with good "momentum". This list is updated
daily by our algorithms to identify stocks by geographical region that respect this investment strategy with regard to the criteria presented.
Several geographical areas are proposed. The "World" list includes companies listed on the world's main financial markets. The other lists are regional: Europe, North America (Canada, United States), Asia (Japan, Australia, Singapore, Hong Kong), Emerging Markets (those included in the MSCI Emerging Markets index), France, Germany, Netherlands, Switzerland and the United Kingdom.
