Momentum investors have had a fantastic time recently. My no-thought defensive portfolio (which comprises the 20 stocks that rose most in the 12 months to June) gained 20.2 per cent in the third quarter. That’s thanks to stocks such as AO World (AO.), Frontier Developments (FDEV), Ocado (OCDO) and Indivior (INDV) all making big gains.
This isn’t just a huge outperformance of the FTSE 350; it’s an even bigger outperformance of my negative momentum portfolio. It lost 16.1 per cent in the third quarter (Q3), as gains on Burford Capital (BUR) were outweighed by falls in Hammerson (HMSO), Rolls-Royce (RR.), Cineworld (CINE) and International Consolidated Airlines (IAG) among others.
This continues long-term trends. For years, momentum has outperformed both the FTSE 350 and negative momentum by a large margin.