Quality Momentum

10 strong trends at companies whose profitability is improving, weighted toward the strongest, monthly.

How it works

Quality Momentum holds 10 of the 500 most actively traded US stocks: those with the strongest price trends over the past year, among companies that generate cash and whose profitability is improving. It puts more money in the stronger trends and rebuilds the portfolio once a month. Each rule is listed below in the order it is applied.

The rules, step by step

1. When it decides. After the market closes on the last trading day of each month, using that day’s closing prices and only information available by then.
2. The stock pool. US-listed common stocks and ADRs, not traded over the counter, closing at $5 or more. Each must have traded at least $10 million a day on average over 20 trading days at this decision and at each of the previous two month-end decisions. Of those, the 500 with the highest 20-day average trading value form the pool.
3. Cash flow. Keeps only companies whose latest quarterly report, filed by the decision day, shows positive free cash flow.
4. Improving profitability. Keeps only companies whose gross margin in the latest filed quarter is higher than in the same quarter a year earlier (as first reported).
5. No sudden spikes. Skips any stock that rose more than 40% over the last month (21 trading days).
6. The ranking. Ranks the remaining stocks by 12-1 momentum: the price change from twelve months ago (252 trading days) to one month ago (21 trading days), using prices adjusted for splits and dividends. The latest month is left out on purpose.
7. The selection. Takes the 10 highest-ranked stocks, with at most two from any one industry sector: when a sector is full, the next-ranked stock from another sector takes the place. Stocks already held get no preference; each rebuild starts from the ranking.
8. How much in each. In proportion to each stock’s 12-1 momentum: a stock up 80% gets twice the money of one up 40%. (Momentum below 1% counts as 1%.)
9. The trades. Made at the next trading day’s closing price: stocks no longer selected are sold, new ones bought, and those that stay are resized to their new amounts. Every buy, sale and resize pays 0.10% of the amount traded.
10. Between rebuilds. No trades. The holdings’ shares of the portfolio drift as their prices move until the next decision.

These rules are frozen (rules version 1) and are exactly what the record uses, every day since go-live and throughout the backtest. Changing any of them would make a new strategy with its own record. Key terms explained.

What to expect: Higher returns than Core in the backtest, with bigger swings and a few large holdings at times.

What would your money have done?

$10,000 put in at the close of Nov 1, 2017, worth at the close of Oct 16, 2026:

Growth of $10,000 against SPY

Fall from the highest value so far

The Bull Rhythm Weekly · every Friday after the close

Follow the strategies as they run live

Eight strategies with fixed rules, every decision made at the day’s close. Each Friday, see where the record stands: what each one made, what it bought and sold, and why.

• This week’s result and the running total since going live, next to the S&P 500
• Every buy and every sale, with the reason in plain words
• What each one holds now, with charts
• The good weeks and the bad ones, reported the same way

See a sample issue →

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Returns over set periods

Year by year

Each calendar year on its own, newest first: the return (bold when ahead of SPY), the worst fall from a high within that year, how much the value swung (volatility, as a yearly figure), Sharpe, the best and worst month, the share of months that ended higher, and beta (how much it moved for each 1% SPY moved). The first and the current year are partial; years before going live are a backtest.

The account, as a ledger

The strategy shown as one account that started with $10,000 on Nov 1, 2017 (change the amount above) and followed every trade. Shares are fractional; share counts include stock splits and reinvested dividends. Gains are measured on average cost. With a split chosen above, part of the account sits in BIL (a 1–3 month T-bill fund) and is put back to the split at every rebuild: each move is one BIL row below, and it buys or sells the same slice of every stock held.

What it holds now

At the close of Oct 16, 2026. It decides after the close on the last trading day of each month and trades at the next day's close. The weights drift with prices between rebuilds. This is the model’s position, published for education, not a recommendation to buy these stocks: a portfolio started today would differ in entry prices and results.

Every trade

1,588 trades in all; the latest 50 below, newest first (up to 300 here; the download has them all). Download the full ledger (CSV). A trade is decided at one day’s close and made at the next day’s close.