Part One

Understanding Momentum

This book is organized into two parts. Part One sets out the rationale for using momentum as a systematic stock selection tool. In Chapter 1, “Less Religion; More Reason,” we provide a discussion of the two dominant investment religions: fundamental and technical. We propose that evidence-based investors consider both approaches. Next, in Chapter 2, “Why Can Active Investment Strategies Work?” we outline our sustainable active investing framework, which helps us identify why a strategy will work over the long haul (i.e., the “edge”). In Chapter 3, “Momentum Investing is Not Growth Investing,” we propose that momentum investing, like value investing, is arguably a sustainable anomaly. Finally, we end Part One with Chapter 4, “Why All Value Investors Need Momentum,” a discussion of the evidence related to momentum investing, which suggests that most investors should at least consider momentum investing when constructing their diversified investment portfolio.