Greatest Momentum Investors Ever: A Look At Their Best Momentum Bets

Momentum investing works well in bullish markets. And the markets have been really bullish this month. Nifty 50 has crossed all time highs as it nears 21,000 and Sensex is approaching 70,000. The question we get asked is whether the market can continue to rise from here or whether there are corrections that can be great buying opportunities. Very few have mastered the art of momentum investing , achieving extraordinary success by capitalizing on market trends and growth opportunities.

In today’s article we look at the top 10 momentum investors in our books, each renowned for their unique strategies and remarkable achievements. From the early pioneers who shaped the practice to contemporary masters pushing its boundaries, these investors exemplify the art of leveraging market momentum for exceptional gains. Let’s get into it.

Greatest Momentum Investor #1: Richard Driehaus

Richard Driehaus, an American investor, is widely known as the father of momentum investing. He founded Driehaus Capital Management in Chicago, focusing on growth and momentum strategies. He started as a stockbroker in the late 1960s and established Driehaus Securities in 1979, gaining fame in the 80s and 90s for his investments in growth stocks, especially in tech and healthcare sectors. He focused on two things: investing in companies expected to grow quickly and buying stocks showing strong upward price movement. This involved buying stocks that are exhibiting strong price momentum.

He received awards like the Horatio Alger Award (2000) and the American Business Awards Lifetime Achievement Award (2009). He was a member of the Barron’s Roundtable.

Richard Driehaus Momentum Investing Plays

• Apple (AAPL) in the 1990s: Driehaus identified Apple’s strong price momentum and growth potential early on, investing heavily in the company before its major boom.
• Home Depot (HD) in the 1980s: Driehaus recognized Home Depot’s potential as a dominant home improvement retailer and invested significantly, reaping substantial profits as the company grew.

Richard Driehaus Home Depot Investment

Richard Driehaus invested in Home Depot (HD) in the 1980s. In fact, his early investment in Home Depot is considered one of his most successful trades and a testament to his momentum investing prowess.

1. Strong Price Momentum: Home Depot experienced significant price momentum in the 1980s, with its stock price increasing rapidly. Driehaus, a pioneer of momentum investing, recognized this trend and anticipated the company’s future growth.
2. Favorable Technical Indicators: Driehaus utilized various technical analysis tools, including moving averages and relative strength indicators (RSI). These indicators signaled strong buying pressure and confirmed his belief in Home Depot’s upward trajectory.
3. Emerging Market Leader: Driehaus recognized Home Depot’s potential to become the dominant home improvement retailer. He saw the growing demand for home improvement products and services and believed Home Depot was well-positioned to capitalize on this trend.
4. Solid Management and Business Model: Driehaus was impressed by Home Depot’s management team and its simple yet effective business model. He saw a company with strong fundamentals and a clear path to long-term success.

What exactly happened to Richard Driehaus’ Home Depot investment? There is limited publicly available information. It is suspected that it was partially sold between 1996 and 2000 which also aligns with Driehaus’s investment philosophy of buying stocks with strong momentum and selling them once the momentum slows down. Remaining amount is assumed to have been sold during 2004 and 2008. This timeframe could be attributed to his desire to diversify his portfolio or his analysis suggesting a potential slowdown in the home improvement market.

Greatest Momentum Investor #2: Ken Fisher

Ken Fisher, a prominent American investment guru and founder of Fisher Investments, is known for his unorthodox strategies and data-driven approach. Fisher began his investment journey in the 1970s, honing his skills as an analyst and portfolio manager. In 1979, he launched Fisher Investments, catering to high-net-worth individuals and institutions.

His investment philosophy is based on a contrarian approach & taking data-driven decisions. Fisher thrives on taking positions contrary to prevailing market trends. This contrarian approach allows him to capitalize on potential market corrections and identify undervalued opportunities. He also emphasizes the importance of data and analysis in making investment decisions. He believes this data-driven approach provides a more objective and informed perspective than relying solely on intuition or market sentiment.

Ken Fisher Momentum Investing Plays

• Apple (AAPL) in the 1990s: Recognizing Apple’s strong price momentum and growth potential, Fisher made significant investments in the company before its major boom.
• Gold in the 1970s: He identified the rising gold price trend and advised investors to buy gold, leading to substantial profits as the price surged.
• Shorting the Japanese Yen in the 1990s: Anticipating the Yen’s devaluation, Fisher implemented a successful short-selling strategy, profiting from the currency’s decline.

Ken Fisher’s Apple Investment

Apple is one of Fisher Investments’ largest holdings, representing a significant portion of their portfolio. According to reports, as of July 2023, Fisher Investments held approximately 52.35 million shares of Apple stock, valued at roughly $10 billion. This makes Apple Fisher’s largest individual stock holding.

1. Strong Price Momentum and Growth Potential: Apple has historically exhibited strong price momentum, with the stock price steadily increasing over the years. Fisher, known for his focus on momentum investing, likely recognized this trend and the potential for further growth.
2. Dominant Market Position and Brand Recognition: Apple is a leading player in the technology industry, with a dominant position in the smartphone and tablet markets. It also enjoys strong brand recognition and customer loyalty, contributing to its long-term success.
3. Consistent Innovation and Product Development: Apple is renowned for its innovative products and services, such as the iPhone, iPad, and Mac computers. Fisher, who emphasizes investing in companies with strong competitive advantages, likely perceived these innovations as key drivers of Apple’s future growth.
4. Financial Strength and Stability: Apple boasts a strong financial position with significant cash reserves and consistent profitability. This financial stability likely appealed to Fisher, who seeks to invest in companies with a solid track record and a clear path to future success.

Greatest Momentum Investor #3: William O’Neil

William O’Neil (born 1932) is a prominent figure in the investment world, known for several achievements: O’Neil’s work and strategies have significantly influenced the field of momentum investing, inspiring countless investors and traders. His principles and methodologies continue to be studied and applied by investors around the world.

• Founded Investor’s Business Daily: In 1963, O’Neil launched this daily newspaper, providing comprehensive coverage of the market and business news.
• Developed the CAN SLIM system: This popular investment strategy combines fundamental analysis with technical indicators to identify high-growth stocks with strong momentum.
• Bestseller “How to Make Money in Stocks”: This book has been a cornerstone for investors seeking to understand and implement the CAN SLIM strategy.
• Several other books on investing: O’Neil’s publications share his insights and expertise with a wide audience of investors.

William O’Neil’s Momentum Investing Plays

O’Neil successfully identified companies like Wal-Mart and Microsoft in their early stages, highlighting his ability to spot potential before others. He advocates making investment decisions based on careful analysis and data, not solely on intuition or market sentiment.

1. Wal-Mart (WMT) in the 1970s: Applying the CAN SLIM system, O’Neil recognized Wal-Mart’s strong fundamentals and relative strength, leading to substantial profits as the company expanded.
2. Microsoft (MSFT) in the 1980s: O’Neil saw Microsoft’s innovative potential for disrupting the software industry, resulting in significant returns for investors who followed his lead.

Greatest Momentum Investor #4: Jim Slater

Jim Slater (1926-2015) was a British investor and author who pioneered the “Zulu Principle,” a unique approach to momentum investing. He emphasized identifying and investing in companies exhibiting strong trends and positive momentum, aiming to capitalize on their potential for significant growth.

Slater primarily focused on high-growth companies with strong earnings potential and attractive valuations compared to future prospects. He utilized technical indicators and chart analysis to identify trends and confirm momentum, seeking to find stocks with breakout potential. While emphasizing momentum, Slater also valued strong underlying fundamentals, ensuring companies had the potential to sustain their growth. He advocated for strict risk management, including setting stop-loss orders to limit potential losses and avoiding overconcentration in any single investment. Unlike traditional diversification strategies, Slater often concentrated his portfolio in a small number of high-conviction holdings.

Jim Slater’s Momentum Investing Plays

• British Petroleum (BP) in the 1950s: Recognizing BP’s exploration potential and the growing demand for oil, Slater invested heavily, reaping substantial profits as the company expanded.
• De Beers in the 1960s: Slater identified De Beers’ dominant market position and the potential for rising diamond prices, leading to significant gains for his investors.
• Grand Metropolitan in the 1970s: Early recognition of Grand Metropolitan’s strong management and its aggressive acquisition strategy resulted in substantial returns for Slater and his followers.

Jim Slater’s British Petroleum Investment

In the 1950s, Jim Slater made a bold move – he invested heavily in British Petroleum, a company at the forefront of oil exploration, and reaped significant profits as the company’s fortunes soared.

1. 1950s saw a global surge in oil demand driven by economic growth and post-war reconstruction.
2. BP was a relatively small player in the oil industry, but it possessed promising exploration rights in the Middle East and North Africa.
3. Slater, a skilled analyst and risk-taker, recognized the potential for significant growth in the oil industry and BP’s unique position within it. He identified BP as a company exhibiting strong momentum, with increasing oil reserves and growing production.
4. He used technical analysis to identify a breakout pattern in BP’s stock price, further confirming his belief in its upward trajectory. Despite some skepticism from others, Slater invested heavily in BP, putting a significant portion of his capital into the company.
5. Slater’s bet paid off handsomely as BP’s oil production and profitability soared in the following years. The company’s stock price multiplied several times, generating substantial returns for Slater and his investors. This successful investment cemented Slater’s reputation as a shrewd investor and a pioneer of the “Zulu Principle,” which emphasizes identifying and capitalizing on strong trends in the market.

Greatest Momentum Investor #5: Cathie Wood

Cathie Wood, founder and CEO of ARK Invest, has become a leading figure in the world of disruptive innovation investing. Known for her bold bets on companies that are poised to revolutionize various industries, Wood’s investment philosophy centers on five key themes:

1. Disruptive Innovation: Wood focuses on identifying companies at the forefront of disruptive technologies like artificial intelligence, automation, robotics, blockchain, and genomic editing.
2. Long-Term Growth: She takes a long-term approach, investing in companies with the potential for exponential growth, even if they are not yet profitable.
3. Research-Driven: Wood and her team conduct extensive research to identify the companies that are likely to benefit from disruptive innovation.
4. Active Management: ARK Invest actively manages its portfolios, making adjustments based on the changing market landscape and new technological developments.
5. Transparency: Wood is known for her transparency, regularly sharing her research and investment thesis with the public.

Cathie Wood’s Momentum Investing Plays

Here are some of Cathie Wood’s best investing bets:

• Tesla (TSLA): Recognizing Tesla’s potential for disrupting the automotive industry with electric vehicles, Wood invested heavily in the company in its early stages. This bet has paid off handsomely, with Tesla’s stock price skyrocketing in recent years.
• Zoom Video Communications (ZM): Wood recognized the potential for Zoom to revolutionize video conferencing due to its user-friendly platform and cloud-based technology. This investment yielded substantial returns as Zoom became a dominant force during the COVID-19 pandemic.
• Roku (ROKU): Wood saw an opportunity in Roku as a leading player in the streaming television market. This bet has been successful, with Roku’s stock price increasing significantly as the streaming market continues to grow.
• Shopify (SHOP): Wood believed Shopify’s e-commerce platform would empower entrepreneurs and disrupt traditional retail models. This investment has proven successful, with Shopify becoming a leading e-commerce platform.

Cathie Wood’s Tesla Investment

Cathie Wood’s investment in Tesla is arguably the most defining and controversial of her career. In 2014, when Tesla was still a fledgling electric vehicle (EV) manufacturer, Wood saw the potential for the company to revolutionize the automotive industry. She made a bold investment in Tesla, allocating a significant portion of her ARK Invest funds to the company.

1. In 2014, the EV market was still in its infancy. Tesla was a relatively unknown company facing significant challenges, including production constraints and financial difficulties. Many investors were skeptical of Tesla’s long-term viability, questioning its ability to compete with established car manufacturers.
2. Despite the skepticism, Cathie Wood saw Tesla as a company disrupting the traditional automotive industry with its innovative technology and vision for a sustainable future. Wood used a long-term approach, investing in Tesla based on its potential for exponential growth and disruptive innovation in the EV market.
3. She focused on Tesla’s technological advancements, including its battery technology, self-driving capabilities, and software platform. Wood believed Tesla could not only capture the EV market but also become a leader in autonomous driving and other emerging technologies.
4. Wood’s investment in Tesla has turned out to be incredibly successful. As the EV market has exploded and Tesla has emerged as the dominant player, its stock price has soared, generating significant returns for ARK Invest and its investors.
5. Wood’s early recognition of Tesla’s potential has cemented her reputation as a visionary investor. However, her investment has not been without its critics. Some argue that Tesla’s valuation is too high and that its long-term growth prospects are uncertain.

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