- After years' of outperformance, defensive and momentum stocks underperformed last year.
- Defensive stocks should resume their good performance because they are risky for some investors.
2021 was a year in which once-good stockpicking strategies turned bad. One of these was momentum investing. Having outperformed the FTSE 350 by 94 percentage points in the previous five years, my no-thought momentum portfolio (which comprises the 20 best-performing shares in the previous five years) underperformed by 14.5 percentage points last year. What’s more, the longstanding tendency for past winners to outperform past losers went into reverse: my negative momentum portfolio actually beat the market last year.
| No-thought portfolio performance | |||||
| in Q4 | last 12M | last 3Y | last 5Y | last 10Y | |
| Momentum | 2.7 | -0.1 | 66.2 | 72.9 | 230.3 |
| Negative momentum | -6.8 | 17.9 | 27.2 | 19.3 | -4.8 |
| Value | 0.9 | 0.6 | -21.3 | -35.1 | 35.0 |
| High beta | -12.8 | -12.4 | -7.0 | -17.5 | -2.1 |
| Low risk | 0.0 | 3.1 | 42.5 | 27.0 | 85.2 |
| Mega caps | 4.8 | 14.5 | 3.5 | 0.4 | 19.9 |
| FTSE 350 | 3.8 | 14.4 | 13.6 | 7.6 | 56.0 |
| Price performance only: excludes dividends and dealing costs | |||||