David Lundgren of MOTR Capital Management and Research - Momentum Investing: When It Works and When It Doesn’t

07-08-2024 • 55 mins

This week on Weighing the Risks we are joined by David Lundgren, Founder and Chief Market Strategist at MOTR Capital Management and Research and Portfolio Manager at Little Harbor. David has more than three decades of investment industry experience, with a focus on technical analysis strategies, particularly momentum and trend following. He is the former Director of Technical Research at Wellington Management, where he was also a Managing Director and portfolio manager with extensive experience managing global long-only and US long-short portfolios. David also held senior analyst positions at Fidelity & Thomson Financial. In addition, he has started several research and investment firms, including hedge fund Lyceum Capital, Breakaway Research, and most recently MOTR Capital Management & Research, Inc. He is also the portfolio manager of a private long short momentum & trend following hedge fund. David taught a graduate level Technical Analysis course at Brandeis International Business School, in Waltham, MA (June 2015-June 2020), where he received the 2015 Excellence in Teaching Award in his first year. He is a Chartered Market Technician (CMT) and Chartered Financial Analyst (CFA) dual charter holder, and a member of CMT Association’s board of directors. He launched and Co-Hosts “Fill the Gap”, CMT Association’s official podcast. David is a graduate of Babson College (1988), with a finance and investments dual major.

Key Takeaways

[03:41] - David’s professional background and what he is focused on in his current roles.
[08:23] - How does David define risk and how does he think investors and advisors should think about it?
[13:07] - What is the momentum factor, how is it classically defined and how does David’s definition differ, if at all, in practice?
[21:50] - Does momentum work for taxable investors if portfolio turnover is too high?
[23:18] - How have machine learning and AI algorithmic trading shifted how momentum operates, as well as how it presents itself in the market?
[26:53] - When you see parabolic moves, they often go a lot longer and higher than people expect but once they stall they often plummet, rather than plateauing. What does David think about this?
[30:27] - Based on current market conditions, does David think we are in a bit of a momentum bubble and how is he accounting for this in his strategies if so?
[36:03] - Various market scenarios and how David would adjust them, if at all.
[39:36] - Bad case scenario for momentum investing and how probable David thinks this is.
[43:27] - Good case scenario for momentum investing and how probable David thinks this is.
[45:08] - Are there any other risks that investors should be considering in the current market environment?

Quotes

[04:40] ~ “It’s the combination of momentum and trend that I think is the real home run, if you will, because momentum is…a very valuable input to the investment process, but it also has a lot of problems with it. Then there’s trend following, which is also a very powerful input to any investment process, but it also has its problems…What I find is when you put them together, they emphasize each other’s strengths, but they also fill the holes of each other’s weaknesses.” ~ David Lundgren

[19:20] ~ “Once you make a decision in a portfolio, there’s only four things that can happen from there. You can either make a little, you can lose a little, you can make a lot or you can lose a lot. The truth is, if we are being honest, the only one of those four things that we can control, is we can prevent ourselves from losing a lot of money and then the rest of it is up to what the market is willing to give us.” ~ David Lundgren

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