A Deep Dive into Growth & Momentum

schwartzfinal
Global Head of Research
Follow Jeremy Schwartz
07/12/2021

On Behind the Markets, a podcast brought to you by Jeremy Schwartz, WisdomTree’s Global Head of Research, we talk to market strategists, business executives and financial advisors about important trends in the financial markets. 

In this episode, Jeremy talks to Randy Watts, CIO of O’Neil Global Advisors (OGA), about the history of the O’Neil team and their unique approach to identify long-term winning stocks.

Listeners will hear about:

  • How William O’Neil came to select the combination of growth and momentum indicators that their team focuses on.
  • The stock selection approach referred to as ‘CANSLIM’ that O’Neil made popular, focusing on a combination on earnings growth, sales growth, margins, innovative products, share reductions and other factors.
  • A discussion of long-term stocks and how much of overall market gains are concentrated in a small percentage of stocks.
  • How the O’Neil team built the new O’Neil Growth Index, which WisdomTree licensed for the WisdomTree U.S. Growth & Momentum Fund (WGRO). WGRO seeks to track the price and yield performance, before fees and expenses, of the O’Neil Growth Index. 
    • This discussion included analysis of proprietary O’Neil factors like the OGA Datagraph rating and the components of earnings growth and relative strength.
    • The risks to traditional growth investing—from stocks becoming overly extended with large drawdowns.
    • Why the O’Neil team focuses on a Pullback factor to find attractive entry points for stocks—and how this focuses on stocks with positive long-term momentum trends but that have ‘pulled back’ off their highs over the short term.
    • Why the Hotness factors and volatility factors are included to manage volatility and avoid crowding in more speculative names.
  • Some of the value exposures that recently came into other momentum strategies, particularly one that follows a twice per year rebalancing process —and how the O’Neil index maintains its growth discipline.
  • The importance of monthly rebalancing for momentum strategies.
  • The concentration of traditional mega-cap growth indexes in a handful of names and why the O’Neil team set up their index with a more diversified factor weighting approach that tilts around an equal-weighted approach.
  • What sectors the O’Neil team likes looking forward, and how the macro environment and interest rates might impact growth stocks.

You can listen to our full conversation with Randy Watts below.

Important Risks Related to this Article

There are risks associated with investing, including the possible loss of principal. The Fund invests in mid- and large-capitalization companies that provide exposure to a portfolio of high growth and momentum U.S. exchange-listed companies. Securities that exhibit momentum characteristics may be more volatile than the market as a whole. Growth stocks, as a group, may be out of favor with the market and underperform value stocks or the overall equity market. The Fund may experience high portfolio turnover in connection with the rebalancing or adjustment of its Index. The Fund invests in the securities included in, or representative of, its Index regardless of their investment merit. The Fund does not attempt to outperform its Index or take defensive positions in declining markets and the Index may not perform as intended. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.

Related Blogs

Introducing the WisdomTree Growth & Momentum Fund

Related Funds

WisdomTree U.S. Growth & Momentum Fund

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About the Contributor
schwartzfinal
Global Head of Research
Follow Jeremy Schwartz
Jeremy Schwartz has served as our Global Head of Research since November 2018 and leads WisdomTree’s investment strategy team in the construction of WisdomTree’s equity indexes, quantitative active strategies and multi-asset model portfolios. Mr. Schwartz joined WisdomTree in May 2005 as a Senior Analyst, adding to his responsibilities in February 2007 as Deputy Director of Research and thereafter, from October 2008 to October 2018, as Director of Research. Prior to joining WisdomTree, he was head research assistant for Professor Jeremy Siegel and helped with the research and writing of Stocks for the Long Run and The Future for Investors. Mr. Schwartz also is co-author of the Financial Analysts Journal paper, What Happened to the Original Stocks in the S&P 500? He received his B.S. in Economics from The Wharton School of the University of Pennsylvania and hosts the Wharton Business Radio program Behind the Markets on SiriusXM 132. Mr. Schwartz is also a member of the CFA Society of Philadelphia.