TF Compounders Quality Momentum

Quality Momentum S&P 500 | Systematic Factor Strategy This portfolio implements a systematic, data-driven investment strategy combining two of the most robust and academically documented return factors: momentum and quality. How it works: Each month, all S&P 500 stocks are ranked by a composite signal combining 12-month price momentum (excluding the most recent month to avoid short-term reversal) and gross profitability (GPA = Gross Profit / Total Assets). Signals are standardised within each industry sector to avoid implicit sector bets, a stock must be a top performer relative to its peers, not just riding a sector wave. The top 10% of stocks by composite score are held in an equal-weighted portfolio, rebalanced monthly. Why it works: Momentum (Jegadeesh & Titman 1993): past winners tend to continue outperforming over the next 6-12 months Quality (Novy-Marx 2013): highly profitable firms systematically outperform and provide natural downside protection in volatile markets Industry neutralisation removes sector concentration, producing a purer and more diversified alpha Backtested performance (2001-2022, S&P 500 universe): Annualised return: ~22% vs ~8% for S&P 500 Sharpe ratio: 1.11 vs 0.50 for S&P 500 FF3 alpha: ~12% p.a. (t-statistic > 8), robust across multiple look-ahead bias checks Risk disclosure: Past performance is not indicative of future results. This is a systematic rules-based strategy with no discretionary overlay. Monthly rebalancing results in moderate turnover (~20% per month).