Category Archives: 52 week high

New Momentum Portfolios

In 2011 Scott’s Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility.  In 2014 I also introduced a pure momentum system, which ranks the same basket of ETFs based solely on 6 month price momentum. The first portfolio was previously called the “ Portfolio” but going forward it will be called the “Conservative Momentum Portfolio” (or “6/3/3 strategy”) to reflect some changes in the portfolio and tracking methodology for both portfolios detailed below.

Bring Your Portfolio Into The 21st Century
Free Access – Special Report

In previous years the Conservative Momentum Portfolio  began with a static basket of 14 ETFs.  The basket of 14 ETFs will be reduced to 10 ETFs. This change is being made in order to further simplify the portfolio. The 10 ETFs are listed below:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EEM iShares MSCI Emerging Markets
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd


The ETFs will still be ranked by 6 month total returns (weighted 40%), 3 month total returns (weighted 30%), and 3 month price volatility (weighted 30%). The top 3 will be purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it will be replaced. Previously, the portfolio purchased the top 4 ETFs and only sold when a holding dropped out of the top 5. In addition, ETFs previously had to be ranked above the cash-like ETF (SHY) in order to be included in the portfolio. This requirement will be removed, so the top 3 ETFs will be held regardless of proximity to SHY.

The real-time performance of the portfolio is below, which reflects any changes made since inception:


Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  For 2015 the strategy will now rank ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover. Previously the strategy bought the top 4 ETFs each month – going forward the top 3 ETFs will be purchased. The portfolio and rankings are posted on the same spreadsheet as the 6/3/3 strategy.

The one year performance of the Pure Momentum system is below:

Pure momentum

The portfolio names are dropping “” because the strategy can be tracked on multiple website. is still an excellent choice for tracking and backtesting the strategies detailed. However, a formidable free option for backtesting these strategies has emerged at Portfolio Visualizer.

The current top 3 ETFs are listed below for each strategy (top 3 are the same for both strategies):

PCY PowerShares Emerging Mkts Bond
SHY iShares Barclays 1-3 Year Treasry Bnd Fd


The current portfolios are below:

Conservative Momentum

Position Shares Purchase Date
PCY 155 11/30/2015
VNQ 53 11/30/2015
SHY 49 12/31/2015


Pure Momentum

Position Shares Purchase Date
PCY 117 8/31/2015
SHY 37 12/31/2015
VNQ 40 10/30/2015


Current signals can be viewed on Scott’s Investments here.

The 52-Week High and Momentum Investing

I frequently discuss various momentum strategies for longer term traders or investors on my blog, Scott’s Investments. More recently, I have begun monitoring various momentum strategies on my blog, for an example of a couple portfolios I track, click here or here.

Several of the portfolios and strategies I track are inspired by Mebane Faber, author of The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets (as an aside, well worth it) and Paul Merriman of and author of Live It Up Without Outliving Your Money!: Getting the Most From Your Investments in Retirement.

Many of the strategies are based on 6 month returns and moving averages. However, I recently read a 2004 paper from the Journal of Finance by Thomas J. George and Chuan-Yang Hwang, The 52-Week High and Momentum Investing. The paper is available on Scribd here. An excellent review of the paper is also available at CXOAG Investing here.

Below is some excerpts from the paper. The author’s conclusion, and the independent review by CXOAG is that using a 52-week high indicator is superior to other momentum indicators (outside of January, in which they are comparable). Their research was done using stock price data from 1963-2001 and the portfolios were held for 6 months.

George and Hwang state in the paper:

Our most interesting results emerge from head-to-head comparisons of a strategy based on the 52-week high with traditional momentum strategies. We find that nearness to the 52-week high is a better predictor of future returns than are past returns, and that nearness to the 52-week high has predictive power whether or not stocks have experienced extreme past returns. This suggests that price levels are more important determinants of momentum effects than are past price changes.

Traders appear to use the 52-week high as a reference point against which they evaluate the potential impact of news. When good news has pushed a stock’s price near or to a new 52-week high, traders are reluctant to bid the price of the stock higher even if the information warrants it. The information eventually prevails and the price moves up, resulting in a continuation.

CXOAG gives a nice bullet point summary of the paper:

  • Based on raw returns across the calendar year, nearness to the 52-week high is comparable to other momentum indicators in forecasting future returns. (See the first table below.) In fact, a large part of the profit from long/short momentum strategies based on past returns comes from stocks whose prices are close to/far from their 52-week highs.
  • Proximity to the 52-week high has predictive power whether or not stocks exhibit past return-based momentum, suggesting that price level may be more important than past price change in explaining momentum.
  • A 52-week high momentum strategy outperforms other momentum strategies for January-segregated returns. (See the second table below.)
  • A 52-week high momentum strategy generates risk-adjusted (for market capitalization and liquidity) returns about twice as large as those associated with other momentum strategies. The outperformance is even larger outside of January.
  • Future returns predicted by the 52-week high do not reverse in the long run.
  • Results are robust to calculating momentum based on 12 months of past returns rather than six months, and to using 12 months of future returns rather than six months.

Finally, CXOAG concludes “the 52-week high is on average a superior indicator of positive momentum for individual stocks (except for a January reversal).”

How can an individual strategy profit using this strategy? For one, don’t depend on it as your sole strategy (for more on that, click here for an article in which I discuss multipe strategies). Secondly, educate yourself: do your own due diligence (CXOAG has updated some of their momentum reviews), backtest strategies and learn from other, professional traders such as those featured at INO TV here or consider using third party screening and trading strategies like those at INO.

If you are comfortable using such a strategy, you could screen for ETFs trading within 3% of their 52-week high. Running that screen today at I came up with the following results:

Ticker Company Performance (Year) YTD 52-Week High
AGG iShares Barclays Aggregate Bond 6.57% 1.06% -0.36%
BIV Vanguard Intermediate-Term Bond ETF 6.07% 0.91% -0.28%
BND Vanguard Total Bond Market ETF 6.16% 1.16% -0.19%
BSV Vanguard Short-Term Bond ETF 4.94% 0.10% -2.18%
BWX SPDR Barclays Capital Intl Treasury Bond 6.20% 3.08% -2.07%
CIU iShares Barclays Intermediate Credit Bd 6.69% 9.13% -0.54%
CMF iShares S&P California Municipal Bond 5.40% 6.06% -0.61%
CSJ iShares Barclays 1-3 Year Credit Bond 5.57% 4.82% -1.15%
CXA SPDR Barclays Capital California Muni Bd 4.79% 6.84% -1.76%
EMB iShares JPMorgan USD Emerg Markets Bond 3.05% 6.91% -1.22%
GVI iShares Barclays Interm Govt/Credit Bond 5.41% 0.28% -0.75%
INY SPDR Barclays Capital New York Muni Bond 6.06% 10.80% -0.80%
JSC SPDR Russell/Nomura Small Cap Japan 3.93% 9.25% -2.65%
LQD iShares iBoxx $ Invest Grade Corp Bond 6.71% 4.44% -1.50%
MUB iShares S&P National Municipal Bond 4.42% 4.07% -1.65%
PCY PowerShares Emerging Mkts Sovereign Debt 9.68% 29.07% -1.78%
PVI PowerShares VRDO Tax-Free Weekly 2.17% 0.81% -1.30%
PWZ PowerShares Insured California Muni Bond 0.44% 9.68% -1.24%
PZA PowerShares Insured National Muni Bond 0.84% 10.98% -1.34%
SHV iShares Barclays Short Treasury Bond 0.96% 0.05% -0.05%
SHY iShares Barclays 1-3 Year Treasury Bond 3.32% -0.12% -0.32%
TFI SPDR Barclays Capital Municipal Bond 6.32% 6.87% -0.86%
UBD Claymore U.S. Capital Markets Bond 4.70% 9.91% -2.18%

In the end, no strategy is a magic bullet and most are not successful all of the time. However, the 52-week high strategy is one that shows promise.