Momentum strategies, put to a 15-year test
Almost every mechanical rule we’ve tested loses to simply buying and holding. This is the one that didn’t. Rank the biggest US stocks by how they’ve been trending, hold the strongest, rotate monthly, backtested across 15 years and every market in between.
Holding the 10 strongest large caps and rebalancing monthly returned 24.0% a year from 2011-01-03 to 2026-09-01, against 14.1% for the S&P 500 and 19.1% for an equal-weight basket of the same 59 stocks. Worst peak-to-trough loss along the way: 20.7%.
Classic setup, a 59-stock large-cap universe, ranked on trailing momentum and rebalanced monthly. Before trading costs and taxes, and the equal-weight line is the honest comparison: it is what the same universe returned without any selection at all.
Updated 2026-09-01 · data through 2026-09-04
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What a momentum stock screener does
A momentum screener ranks a universe of stocks by how strongly they have been trending and hands you the top of that list. It is not a chart pattern and it is not a prediction: it is a sort, run over every company in the pool, on one number, the return over the past year.
That makes it a different instrument from a value screen, which asks what a company is worth, and from a single-stock indicator, which asks what one chart is doing. This one asks only which names are strongest right now relative to the rest, and it is rebuilt every month rather than every time you look, because a list that changed daily would have you trading daily, which is how a momentum edge gets spent on costs.
What “momentum” means here
This isn’t a single-stock signal. It’s relative strength. Each month we rank a fixed basket of large US companies by their return over the past year (skipping the most recent month, which tends to reverse), buy the strongest handful in equal amounts, and hold them until the next re-rank. Winners that keep winning stay in the book; laggards drop out. It’s the best-documented anomaly in finance, and it showed up cleanly in our own tests.
Why it beat buy-and-hold, and when it won’t
Trends persist longer than they “should,” so riding the strongest names and rotating out of the weak ones compounded faster than holding the index in our tests. It even survived 2022: momentum rotated out of tech and into energy while the S&P fell. But momentum has real teeth. It suffers rare, violent reversals (2009 was brutal), and a run of them can wipe out years of edge. This is a return engine with a rough ride, not a free lunch.
The honest catch
The headline returns are before taxes, a monthly-rebalanced book generates short-term gains, so this really only shines in a tax-sheltered account. The universe is today’slarge caps, which flatters the early years (survivorship); the equal-weight line on the chart shares that bias, so the gap between momentum and equal-weight is the part that’s genuinely selection, not luck. Results use monthly closes, ignore dividends-as-cash, and past performance predicts nothing. Educational, not investment advice.
Want to test a rule on one specific stock instead? That’s the backtester. Want to run this against your own portfolio? That’s what Pulse is for.