Don’t forget momentum in race after value says ProShares’ Hyman
With the growth factor disappearing in the rear-view mirror, recent talk has been all about value, but Simeon Hyman, Head of Investment Strategy at USD54 billion ETF issuer ProShares, reminds us that momentum is important too.
“Momentum has proven to be a powerful evergreen approach to driving performance,” he says. “And it’s widely studied in academic literature.”
ProShares has just launched its Nasdaq-100 Dorsey Wright Momentum ETF (QQQA), which is the first ETF to apply Dorsey Wright’s proprietary Relative Strength signal to the Nasdaq 100, offering investors a focused fund that targets the Nasdaq-100 stocks identified as having the greatest potential to outperform.
Dorsey Wright ranks the Nasdaq-100 securities by Relative Strength, and the 21 top-performing stocks with the highest Relative Strength are included in the fund and equally weighted. The fund, which is reconstituted quarterly, includes names like Tesla, Alphabet, Marriott International and Micron Technology.
“One of the things I like to remind folks is that momentum tells you what to buy and what not to buy which makes it topical,” Hyman says.
“The structure of the ETF positions QQA as an important choice for investors to continue to invest in technology in the post-pandemic opening up of markets,” he says. “The holdings are equally weighted which makes it particularly useful these days because the top-heavy nature of the Nasdaq 100 and any of the broad-based indices is a risk factor.”
Hyman believes this is a strong formula for maintaining that technology exposure as the world goes into the next phase.
“The turn to value poses a challenge, because if you rotate your portfolio all the way to value, you run the risk of it being a short term rebound,” he says. “Given how large the technology sector is, as well as the nature of innovation, you don’t want to be completely out of the trade and this is a great way to stay in it.”