Validea’s top performing model, Twin Momentum, recently added Nvidia (NVDA) to its list of holdings — and for good reason. The strategy seeks stocks that combine strong fundamentals with strong price momentum, a pairing that academic research has shown can meaningfully improve the odds of outperformance.
Here’s how Nvidia passed each step of the process — and why other Validea models also rate the stock highly.
The Research Behind Twin Momentum
The Twin Momentum approach is based on the paper “Twin Momentum” by Dashan Huang, Assistant Professor of Finance at the Lee Kong Chian School of Business at Singapore Management University.
Huang’s research looked at combining traditional price momentum with improving fundamentals to generate market outperformance. He identified seven key fundamental variables:
- Earnings
- Return on equity (ROE)
- Return on assets (ROA)
- Accrual operating profitability to equity
- Cash operating profitability to assets
- Gross profit to assets
- Net payout ratio
The researcher found that when fundamental momentum was combined with price momentum — measured over the past year while excluding the most recent month — the performance improved significantly vs. using fundamental or price momentum in isolation.
Validea used the investment framework outlined in Huang’s paper to create our Twin Momentum Investor model. Here are the three steps that the strategy follows to identify stocks with the strongest combination of improving fundamentals and sustained price momentum — along with how Nvidia scores at each stage.
Step 1: Fundamental Momentum — PASS
We start by screening for companies in the top 20% of our universe based on fundamental momentum.
Nvidia’s score of 33.34% places it in the 1st percentile of our database (lower is better), easily passing this first hurdle. This score reflects gains in profitability and returns on capital over time — a hallmark of a business whose fundamentals are strengthening.
Step 2: Twelve Minus One Momentum — PASS
Price momentum is measured as one-year performance excluding the latest month — an approach that captures intermediate-term trends without the noise of short-term reversals.
Nvidia’s 12-minus-1 month return of 44.56% ranks it in the 17th percentile in our database, clearing the second hurdle.
Step 3: Combined Rank — PASS
Only the top 5% of stocks on the combined fundamental and price momentum measure pass this final screen. Nvidia ranks in the 1st percentile, putting it among the strongest Twin Momentum candidates in the market today.
Secular Tailwinds Powering Nvidia’s Growth
Nvidia is riding some of the most powerful growth trends in the market today. The company’s GPUs have become the go-to standard for artificial intelligence, powering everything from generative AI models to advanced data analytics. This has fueled record demand from cloud providers, enterprises, and research institutions, driving rapid growth in its data center business.
At the same time, Nvidia is benefiting from the broader AI investment boom, expansion in high-performance computing, and new applications in industries like automotive, healthcare, and robotics. These secular tailwinds, combined with its dominant technology and software ecosystem, have positioned the company at the center of one of the most significant technology shifts in decades.
Other Validea Models Like It Too
While Twin Momentum gets the attention today, Nvidia’s financial strength is captured across multiple strategies on Validea:
| Model | Strategy | Based On | Score | Description |
|---|---|---|---|---|
| Twin Momentum Investor | Twin Momentum | Dashan Huang | 100% | Combines fundamental and price momentum to identify elite stocks. |
| Momentum Investor | Momentum | Validea | 89% | Looks for strong price momentum with EPS growth, high ROE, and falling debt. |
| Growth/Value Investor | What Works on Wall Street | James O’Shaughnessy | 80% | Combines large-cap value and growth approaches, emphasizing earnings growth and strong relative strength. |
Nvidia by the Numbers
- Latest Close: $182.02
- Market Cap: $4.44 trillion
- Sector: Technology
- 52-Week Range: $86.62 – $184.48
- Relative Strength: 83
- PE Ratio: 58.6
- Profit Margin: 51.7%
- ROE: 115.5%
- ROA: 75.9%
- LT EPS Growth: 109.2%
- Debt/Equity: 0.10
Click here to view the full Factor Report on Nvidia
Nvidia is a company firing on all cylinders fundamentally, and still delivering exceptional market momentum. That’s the type of stock Twin Momentum — and several other Validea models — is built to find.
