Most investors already know about the “Dividend Aristocrats,” a class of stocks known for steadily increasing their dividend payments over time.
But what about the “Momentum Aristocrats?”
As the name implies, these stocks can sustain high levels of momentum over long periods of time. And they can come from virtually any industry…
Like the California-based contractor that whose shares rocketed up 85.5% between March and May of this year…
Or the American chipmaker whose shares climbed 43% between May and July…
Or the Pennsylvania-based financing company that locked in a 33% gain during last year’s holiday season.
These stocks are practically invisible to the average investor. But if you know where and how to find them, the potential upside is massive.
One historical study found that a strategy centered around these Momentum Aristocrats beat the total return of the S&P 500 300-to-1 over the long term. Here’s how they do it…
Blueprint for a Momentum Aristocrat
Strong momentum is obviously a primary factor for these stocks. But it’s far from being the only factor.
Momentum, as a stock market phenomenon, is typically more short-lived than many other factors.
Very few stocks can hold onto market-beating momentum for more than a year … and the ones that do can be vulnerable to vicious post-bubble busts.
My research shows that it’s incredibly rare for a stock to maintain a high Momentum rating for more than 12 months. Most often, it doesn’t last much longer than two months.
And stocks that only have strong Momentum scores are largely driven by speculation and hype — not rock-solid business models.
That’s why my Infinite Momentum Alert system insists on more than just strong momentum.
It screens and ranks on Quality and Value metrics as well. And doing so helps us find stocks with sustainable momentum … an incredibly important trait when constructing an effective market-beating portfolio.
Think of it like this…
A pure-momentum portfolio is like a ’71 Ford Pinto with a rocket strapped to the roof. It’ll go fast … once. And you wouldn’t want to be the one behind the wheel for that, either.
But a balanced portfolio, focusing on quality, value and momentum? That’s like a brand-new, top-of-the-line Porsche 911. You can run that baby for 200,000 miles and probably a lot more. And it’ll still fly past everything else on the road.
I know I’m not alone in preferring the Porsche over the Pinto.
We simply can’t expect a stock without strong fundamentals — what the Quality and Value factors cover — to consistently beat the market. All the hype in the world isn’t enough to prop up a terrible, money-losing company.
So what does it look like when a stock has high quality, high value, and strong momentum?
A Cut Above the Rest
In March of this year, I added a California-based contractor to my Infinite Momentum Alert portfolio.
The stock was already on a roll, with momentum running full throttle and high scores in both quality and value.
And despite already making huge gains on the year, the growth runway was still long for the company.
With less than $1 billion market cap, it was firmly in small-cap territory with an even greater chance of beating the market.
Sure enough, the stock became a Momentum Aristocrat before our eyes. And in less than three months our position reached a near-triple digit gain.
We’ve since sold the stock since it no longer met our strict standards. But on Thursday, I’ll be adding 10 more potential Momentum Aristocrats to the portfolio. Click HERE to get access.
To good profits,
Chief Investment Strategist, Money & Markets
