4 Top-Ranked Momentum Picks Using Driehaus Strategy
Zacks Investment Research | Dec 29, 2019 08:22PM ET
Richard Herman Driehaus used the "buy high and sell higher" rule to create an investment approach. Investors, who have a high level of risk appetite, may think of using this particular investment strategy. They principally invest in momentum stocks using the Driehaus strategy. The success of this investment approach eventually helped Richard Driehaus make a place in Barron’s All-Century Team.
The American Association of Individual Investors (AAII) proved that the strategy has the potential to offer higher-than-market returns. AAII’s portfolio, which was developed based on the Driehaus strategy, has returned more than 300% since the end of the last bear market compared with 85.5% gains registered by the S&P 500.
A Look at Driehaus’ Strategy
After a detailed study of the Driehaus’ strategy, AAII concluded that it mainly focuses on strong earnings growth rates and impressive prospects to pick potential outperformers. While this strategy was made to provide better returns over the longer haul, companies with a strong history of beating estimates were also given importance.
“I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in a decline and try to guess when it will turn around,” Driehaus had said in an interview.
Screening Parameters
In addition to the 50-day moving average and relative strength, we have considered a few parameters for picking the best stocks. As companies with a strong history of beating estimates usually outperform the market, we added this to our screen. Also, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Momentum Score of A or B. Our research shows that stocks with a Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.