Reading the financial media's recent coverage of the downfall of momentum investing, you'd think it happened just last night, maybe when you were out to the movies.
There was the March 8 feature in
saying that momentum's "days were over." Then two days later
The Wall Street Journal
story on the mo-mo crowd ended with an ominous quote wondering when, if ever, small-cap growth stocks -- the grist of momentum managers -- would come back in vogue. Then the leading personal finance piece in this week's issue of
chimed in. Its quote from momentum manager Art Bonnel (also quoted in the
story): "There's no more momentum."
momentum funds story preceded the trio by about 10 days. But that's nothing to brag about. The trend's been building steadily since the summer, as each and every story pointed out.
And yet, it took until now for the mutual fund writers -- and there are plenty of them -- to pick up on it.
Why the blindspot?
It could be that the media is afraid to take on the momentum mavens that their stories helped propel to glory days -- the Garrett Van Wagoners, Mary Lisantis, Mike DiCarlos. But that's unlikely. Reporters love a falling-star story. And with mutual fund performance data readily available from services like
, it doesn't take a Bob Woodward to ferret them out.
There's the possibility that the managers themselves were trying to put a good spin on things, giving reporters that "our fund's for long-term investors" line and castigating them for having the short-sighted gall even to inquire about the declining numbers.
That's a plausible scenario. In fact it happens all the time. But in this case, each individual manager had an interest in pointing out that, hey, it's not just him. It's all of the momentum brethren. With 20-20 vision, I now recall momentum magnate Van Wagoner on
around Christmastime, practically pleading for an ear. The big-cap bull market-obsessed press, he said, was missing the story of the floundering small- and mid-cap funds. He was right.
A third, and the most likely possibility, is that the press has trained itself too well to think like the industry it covers. That is, in terms of quarters and "year-end" results. The mid- and small-cap funds had strong runs through the spring -- strong enough to "camouflage" their subsequent underperformance, as the
aptly put it. But as of Jan. 1, it started to become clear that the emperor had no clothes.
Unfortunately, money doesn't know from quarters. It gets eaten away day after day, without regard for Lipper reporting dates.
So did the press do a disservice to the investing public? Or did it get there in the nick of time?
As judged by one fund manager's take, the former. John Montgomery of Bridgeway Capital, whose aggressive growth and smaller-cap funds have held relatively steady through this era, says he plans to beef up on stocks that the momentum players have left for dead. "When everybody's writing about it, that's the time to get in."
And what about the public? Perhaps the best bet is to forget about what you missed in the papers, since they miss it anyway. Stick with the movies.
By Jamie Heller