Momentum—once it picks up, it can be difficult to stop and while the debate in the capital markets is whether value can sustain its lead over growth, investors can’t forget about the momentum factor, especially if events like a U.S.-China trade deal can spark a year-end rally.
Investors can take advantage of factor-based exchange-traded funds (ETFs) that specifically capitalize on momentum. They can start by looking at the 10 largest based on assets under management (AUM) year to date.
At the top of the list is the iShares Edge MSCI USA Momentum Factor ETF (BATS: MTUM), which has been yielding gains of over 19% YTD. The fund seeks to track the investment results of the MSCI USA Momentum Index.
The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. As far as the index goes, it consists of stocks exhibiting relatively higher momentum characteristics than the traditional market capitalization-weighted parent index, the MSCI USA Index, which includes U.S. large- and mid-capitalization stocks.
“Since the beginning of September, the Dow Jones U.S. High Momentum index, comprising 200 companies ranked as having the highest 12-month total return, has fallen 1.7%, while the S&P 500 has risen 1.7%,” wrote Evie Liu in Barron’s. “That isn’t surprising, because momentum investing—chasing the market’s best performers in hopes their gains will continue—hasn’t always worked, especially when trends reverse as sharply as we’re seeing now.”
Reasons to use MTUM per the iShares website:
- Exposure to large- and mid-cap U.S. stocks exhibiting relatively higher price momentum
- Index-based access to a specific factor which has historically driven a significant part of companies’ risk and return
- Use to help manage exposure and risk within a stock allocation
- MTUM’s top 10 holdings as of Oct. 16:
- Mastercard Inc Class A: 5.37%
- Microsoft Corp: 5.33%
- Procter & Gamble: 5.32%
- Visa Inc Class A: 5.28%
- Walt Disney Communication: 4.06%
- Cisco Systems Inc: 3.24%
- Comcast Corp Class A Communication: 3.13%
- Merck & Co IncHealth Care: 2.70%
- Starbucks CorpConsumer Discretionary: 2.38%
- Paypal Holdings Inc: 2.33%
Here’s the rest of the biggest momentum ETFs list based on AUM:
| Symbol | ETF Name | Total Assets ($MM) |
| MTUM | iShares Edge MSCI USA Momentum Factor ETF | $9,201.12 |
| PDP | Invesco DWA Momentum ETF | $1,555.65 |
| XMMO | Invesco S&P MidCap Momentum ETF | $576.61 |
| ULVM | VictoryShares USAA MSCI USA Value Momentum ETF | $477.08 |
| ONEO | SPDR Russell 1000 Momentum Focus ETF | $429.90 |
| UIVM | VictoryShares USAA MSCI International Value Momentum ETF | $341.48 |
| PUI | Invesco DWA Utilities Momentum ETF | $281.65 |
| DWAS | Invesco DWA SmallCap Momentum ETF | $220.28 |
| PTF | Invesco DWA Technology Momentum ETF | $203.86 |
| USVM | VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | $196.68 |
For more market trends, visit ETF Trends.