Alpha Architect US Quantitative Momentum ETF

QMOM

Market cap $415M

Alpha Architect U.S. Quantitative Momentum ETF offers a high-conviction, actively managed momentum strategy with a distinct, pro-cyclical sector mix. QMOM is heavily overweight industrials and basic materials, underweight technology and financials, resulting in low correlation with major indexes and peers. The fund trades at a 26.2x P/E premium, driven by high-growth, low-profitability holdings, but has a history of elevated volatility and underperformance.

Momentum investing remains attractive, but choosing the right ETF is critical, due to varying risk and return profiles. I rate Alpha Architect U.S. Quantitative Momentum ETF as a Hold; its quantitative approach and frequent rebalancing lead to underperformance, high risk, and low momentum compared to peers. SPMO and MTUM offer stronger returns, lower risk, and better exposure to leading large-cap stocks, making them superior alternatives for momentum investing.

The Alpha Architect U.S. Quantitative Momentum ETF holds 50 trending stocks, with a focus on mid-caps, consumer discretionary and industrials. Despite outperforming in certain periods, QMOM has lagged the Russell 1000 benchmark and key competitors since its inception in 2015. QMOM's volatility may benefit swing traders, but it lacks long-term attractiveness even within the momentum ETF category.

Alpha Architect U.S. Quantitative Momentum ETF offers exposure to top-performing stocks using momentum strategies while maintaining reasonable valuations, with a P/E ratio of 18.9x. QMOM's portfolio is diversified across mid-caps and various sectors, with low exposure to technology and mega caps, providing a great diversification opportunity. Despite its low mega-cap exposure, QMOM has achieved competitive gains, making it a compelling option for investors seeking to benefit from the broadening market leadership.

Alpha Architect U.S. Quantitative Momentum ETF offers exposure to high momentum stocks through a systematic approach with quarterly rebalancing. The QMOM ETF's multistep screening process focuses on sustainable momentum characteristics while avoiding higher valuations and risk. QMOM has performed in line with iShares MSCI USA Momentum Factor ETF since late 2020, with an edge due to equal weighting and continuous adjustment to new momentum dynamics.

The Alpha Architect U.S. Quantitative Momentum ETF has outperformed most equity ETFs, with a +17% return in 2024. QMOM follows a momentum-based strategy, identifying stocks that are experiencing an uptrend and building a portfolio exclusively with those names. The fund starts with 1,500 US equities and proceeds to eliminate illiquid securities, REITs, ADRs, and companies with limited financial data.

Alpha Architect U.S. Quantitative Momentum ETF (QMOM) is an actively managed fund implementing a scientifically designed strategy. Surprisingly, the current portfolio is attractive regarding both valuation and growth metrics. It is heavy in industrials and mid-caps. QMOM has outperformed in some time frames, but performance since December 2015 is underwhelming. It seems to be an excellent swing-trading instrument, but an average long-term investment.

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