Momentum vs Valuation: Making Sense of Markets
Price momentum is the concept that stocks that have moved higher in the recent past will continue to move higher in the future. It is one of the most common drivers of investment returns.
In 2015, the argument over price momentum versus traditional methods of stock valuation took shape with the financial media’s fascination with FANG stocks – Facebook, Amazon, Netflix, and Google (now Alphabet).
These stocks continued to rise, with little regard for market conditions, and in the case of Netflix and Amazon, with little regard for traditional valuation metrics like price/earnings.
When it works, momentum tends to continue for long stretches of time. However, when it breaks down, the sell-off can be quick and dramatic, sometimes catching investors unaware.
This webinar focuses on how price momentum has worked for and against stocks over the past several quarters, using the Azzad Ethical Fund (NASDAQ: ADJEX) as a case study.