Growth and momentum strategies in general ruled the day in 2011. And in a recent RealMoney column, Validea CEO John Reese looks at two growth- and momentum-oriented strategies that performed quite well, as well as a value-based approach that also beat the market by a wide margin.
“Value strategies were dogs last year, while growth did better and momentum did best,” writes Reese. “Often, what outperforms one year under performs the next, but not always. If you think the market will perform in 2012 much like it did in 2011, make these three strategies the foundation for this year’s investing.”
The two growth-focused approaches are Reese’s Momentum Investor strategy and his James O’Shaughnessy-based strategy. A 10-stock portfolio picked using the former surged 20.9% in 2011, while a 10-stock portfolio picked using the latter jumped 13.3%. (The O’Shaughnessy-based model picks some growth and some value stocks, but in 2011 its big winners tended to be from the growth side.)
Reese offers some picks that these two strategies are high on right now, including casual dining chain Buffalo Wild Wings, which the Momentum model likes, and Wal-Mart, which the O’Shaughnessy-inspired model likes. He also takes a look at his Warren Buffett-inspired model, which had a stellar 2011 despite the rough climate for value stocks. A 10-stock portfolio picked with the model returned 10.2% in 2011. One stock it is high on: cleaning and sanitation industry firm Ecolab.