Oct 19, 2026 · 28 min
Value and momentum join forces in systematic investing
Talk Your Book: The Case for Value and Momentum
Combining two widely studied factors may reduce each strategy’s weaknesses, but disciplined construction matters more than attractive backtests.
- 1Value and momentum can work as complementary signals rather than sequential screens, creating a more balanced systematic strategy.
- 2Portfolio buffers, broad holdings, and sector guardrails help manage turnover and concentration without abandoning factor exposure.
- 3Investors should distrust overly precise backtests and favor academically grounded, simple combinations over aggressive historical optimization.
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The brief
Michael Batnick and Ben Carlson speak with Lance Humphrey of Victory Capital about combining value and momentum as complementary signals in systematic portfolios.
Humphrey argues that broad factor definitions and portfolio buffers can make the combination more practical, limiting turnover while preserving exposure across regions and market segments.
The conversation tests whether momentum adds information beyond fundamentals, including how improving earnings and cash flow can accompany strong price trends in AI and semiconductor companies.
Portfolio construction becomes the safeguard: broad holdings and within-sector comparisons aim to prevent concentration while keeping the strategies suitable as core portfolios.
The sharpest warning concerns backtests: simple, academically grounded combinations may be more credible than finely optimized results built around historical precision.
What was said on this episode
20 statements · 12 positive · 8 neutral
Combining investment factors is currently working well for investors.
“combining things is probably working pretty well for investors”
Listen at 1:23
Combining value and momentum may smooth weaknesses in each factor.
“putting them together simultaneously, is to maybe help smooth out some of those rough edges”
Listen at 4:56
The strategy measures value using three valuation metrics.
“we're simply trying to take three valuation metrics”
Listen at 6:05
The strategy uses six- and twelve-month momentum signals.
“we are looking for six and 12 month momentum”
Listen at 6:30
The strategy averages valuation and momentum scores equally.
“those two numbers are averaged together”
Listen at 7:09
Combining value with momentum lowers portfolio turnover.
“By combining the two, you certainly lower the turnover.”
Listen at 7:47
The strategy selects the top 25% by combined value-momentum score.
“we take the top 25% of the universe based on that combined value momentum score”
Listen at 8:14
Value and momentum factors work across different markets.
“we do see that they work well across different markets”
Listen at 9:45
Value and momentum signals can strengthen outside U.S. large-cap stocks.
“these signals sometimes are magnified. as you kind of move away from US large cap”
Listen at 9:50
Stocks combining strong valuation and momentum outperformed momentum-only stocks.
“the stocks that had a strong valuation along with that momentum, we're faring much better than momentum alone”
Listen at 11:44
Momentum has strongly resurged as an investment factor in recent years.
“there's been a really strong resurgence in momentum as a factor”
Listen at 13:00
Price momentum is highly correlated with improving business momentum.
“there's a very high correlation in price momentum relative to business momentum”
Listen at 15:16
Investors should systematically exit positions when momentum reverses.
“I think it's important to be systematic in exiting that trade.”
Listen at 16:41
Rapidly improving fundamentals can make high-momentum semiconductor stocks look attractively valued.
“they do have very strong momentum, but because the fundamentals are moving at such a rapid pace, it's making the valuation look decently attractive as well”
Listen at 18:06
The products follow combined value-momentum metrics without qualitative overrides.
“we are strictly following the index based off of those combined metrics”
Listen at 20:04
The core strategy holds the top quarter of its investment universe.
“we take a quarter of the universe, so 25%”
Listen at 21:00
The strategy evaluates factor metrics relative to each stock’s sector.
“those are all done relative to a stock's own sector”
Listen at 22:14
Sector-neutral scoring limits concentration in any single sector.
“The sector neutrality component of the scoring prevents it from being overly concentrated in one sector.”
Listen at 23:26
The strategy allocates equal weight to value and momentum.
“In our case, value, momentum are 50-50 each.”
Listen at 24:24
Combining value and momentum helps reduce their individual drawdowns.
“by putting them together you do help smooth out some of those drawdowns that each could produce on their own”
Listen at 26:26
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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