ETF Trends CEO Tom Lydon discussed the Virtus Terranova U.S. Quality Momentum ETF (JOET) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
JOET strives to deliver exposure to U.S.-listed large-cap companies that combine strong quality fundamentals with positive momentum technical trends. The Fund seeks investment results that correspond, before fees and expenses, to the performance of the Terranova U.S. Quality Momentum Index.
This fund has become more important for investors to identify longer-term trends. Combining quality with momentum, “quality momentum” is a modern index strategy that offers an intuitive investment balance of both offense and defense. The idea is to capture changing market dynamics and different investment cycles through a combination of fundamental (quality) and technical (momentum) measures.
JOET provides exposure to the best performing U.S. large-cap companies with the highest quality fundamental characteristics, resulting in a distinct portfolio built for long-term growth. It seeks to identify and capture the returns of high-conviction investment opportunities characterized by fundamental (quality) and technical (momentum) attributes.
Momentum investing is rooted in the notion that securities on torrid paces will continue to thrive over the near term. Long-term data for the momentum factor are compelling, but the factor can be volatile. Momentum investing targets companies exhibiting high levels of growth.
Additionally, the momentum factor selects company stocks that have recently outperformed based on the idea that “the trend is your friend” and that stock market leaders typically continue to outperform. This type of strategy can be an effective way of targeting growth-oriented companies since stocks with positive momentum often continue to generate strong earnings.
The quality factor is more fluid but can emphasize key indicators such as profitability, management efficiency, and cash flow. While the quality factor often trades at a premium to value, quality stocks are usually less volatile than traditional broad market strategies, indicating some overlap with the low volatility factor.
The quality investment factor can help investors focus on companies that are better equipped to handle uncertainties the markets may throw at us. Sift out corporations with questionable profit outlooks and rising debt levels as a way to hone in on those with solid fundamentals.
Listen to the full podcast episode on the JOET:
For more podcast episodes featuring Tom Lydon, visit our podcasts category.