Archive Category: Infinite Momentum Alert Archive

It’s time for another Member’s Mailbag! We have a robust running list of questions over the last four weeks, so thanks to everyone who wrote in. I’m eager to answer your questions and fulfill on your request as best as my team and I can. So let’s dig in…

I’ve written before about how investing in smaller companies has historically given investors a chance to beat the market. In this March 1 piece, I explained why small-cap stocks have offered a premium return:

One thing that was a pleasant surprise when I developed our Infinite Momentum system was that it produced, on average, positive gains in both “up” and “down” markets. Here, an “up” market is any time the benchmark S&P 500 was, well, up during the strategy’s four-week holding period. And of course, it’s considered a “down” market any time the benchmark declines.

We’ve had previous discussions about the impact of earnings releases on the stocks we own. For instance, in my performance review note on March 15, I outlined the earnings announcement made by JAKKS Pacific Inc. (Nasdaq: JAKK) on February 29, which catalyzed a sell-off in the stock.

I wouldn’t say it’s common knowledge… But amongst investors who are aware of investment “factors,” the so-called size premium is one of the better-known ones. It was also one of the first to be discovered, decades ago … and was quickly put into practice by countless hedge funds and quantitative trading firms. In layman’s terms, “small” companies have historically outperformed “large” companies, where size is measured by the market capitalization (aka market cap) of the stock.