Is Value-Momentum Even A Thing?

 

“Only the disciplined ones in life are free.
If you are undisciplined, you are a slave to
your moods and passions.”
– Eliud Kipchoge

Eliud is not a guru born in the 1300’s. And he didn’t lead the Romans to victory after victory. He’s a slightly built man that did something no one has ever done before.

…Even when I read what he did, I still can’t believe it. The thought that goes through my head each time I read (and do the math) is, “He did what 26 times in a row??? I can’t even do that once.”

On September 16th, 2018 Eliud ran 26.2miles in two hours, one minute and 39 seconds. That means his average mile pace was 4 minutes and 38 seconds. 26. Times. In. A. Row.  

If you want some laughs and to see just what his pace looks like on normal people, check this out, it’s pretty funny and puts into perspective what discipline can get you.

What drew me to him was his “discipline” quote.

Is Eliud one of the most disciplined runners/athletes ever? Probably.

But what I really want to know is, what’s his process? What does he eat? How does he recover? How does he handle stress on his body or when his body is not working 100%.

“What’s his process”, was the question I kept hearing in my head.

I love this question because the process is the outcome.

The process is the answer.

An investor doesn’t own TSLA (Tesla), what they really own is the process that told them to buy Tesla. Tesla stock is just the outcome of each investor’s process.

So when I read something or hear something, one of the first things I want to know is what does it look like? This is one of my first steps in my process.

What does Tesla look like? Not the car but the actual company.

And the answer is always visual for me.

I want to know what the investment LOOKS like. I don’t want to read about it. I WANT TO SEE IT.

And so I take a look.

Below is the price chart of Tesla over the past 18 months.

The above picture tells me everything I want to know about a Tesla. When I see an image that looks like an erratic EKG of someone in the emergency room, I know there are problems at that company.

No need to read its 10-k. Or listen to the earnings call. The picture above tells me everything… Things ain’t good at the old Nummi Car Plant in Fremont California

The above picture is what a problem company looks likes, which could also read, this is what a problem investment looks like.

Stick with me here because I’m taking a right turn and moving my attention towards financial advertising and away from publicly traded companies.

An investor’s process is even more important when they come across a financial advertisement.

Below is one of my favorite advertisements that gives me anaphylactic shock each time I look at it. I need to have my own store of EpiPens just incase its following me around the web. 

I notice two things happening in my brain when I read this advertisement:

First, I hate jargon. Here’s my rule: the more jargon a person, a company or an ad uses the more I realize they don’t know what they are talking about.

The above ad sells an ETF called a, “Value Momentum Trend” investment… is that even a thing? And isn’t momentum and trend the same thing??

But let’s say value-momentum-trend is a thing, and not just three words put together that sounds clever. Let’s say Alpha Architects is simply adding their investment spin on an old idea. But why use jargon? It’s lazy.

Sell your cleverness.

Second, what does a “Value-Momentum-Trend” investment even look like? I know what value charts look like and l know what momentum charts look like too. But not the combination of both with the added “trend” at the end.

So I pulled up a picture of this “Value-Momentum-Trend-Thingy” and immediately compared it to a Value ETF (SPYV) and a Momentum ETF (MTUM). After all this is a “Value Momentum Trend fund” so I would assume it would have characteristics of both in it.

Below is picture comparing The Value Momentum Trend Fund (which is red) to the S&P500 value ETF, which is blue. And the MSCI Momentum Fund ETF, MTUM, which is green.

And here is what my eyes tell me immediately.

The Value Momentum Trend fund is underperforming Value by more than seven percent this year. And its underperforming the Momentum fund by more than 13%.

Again…

RED = the Value Momentum Trend Fund (VMOT)

BLUE = Value via SPYV

GREEN = momentum via MTUM

The takeaway is not a “hit piece” on Alpha Architect, but to be able to have a process that can immediately or very close to immediately tell you almost everything you need to know.

Are you safe? How do you know?

Should you own bonds? How do you know?

Did the fall this week change everything and is about to proceed a Harry-Dent-like crash?

The process is the answer.

The process builds great futures. The process provides stability. The process keeps investors away from GE for the past 20 years.

The process is the answer.

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

P.S. Do you have a process that can eliminate your anxiety, stress and overwhelm around investing? I’m not sure what you will like best about, how powerfully simple it is. Or how is the best noise filter you will ever come across. It’s the easiest place to start.

Subscribe to RC's Weekly Investment Insights

Comments