MI Rewind: Buying Winners Through Momentum Investing w/ Wes Gray

This episode explores the nuances of value and momentum investing strategies, featuring an interview with Dr. Wes Gray, a finance PhD and asset management firm founder. Against the backdrop of a long bull market, the discussion examines whether an S&P 500 holding provides sufficient international exposure, revealing that better value may exist internationally despite multinational company presence in the US. More significantly, the conversation delves into momentum investing, defined as buying winning stocks, and its psychological underpinnings—exploiting investor greed and fear of missing out (FOMO). For instance, the impact of strong price action on a company's cost of capital is illustrated through comparisons between Amazon and Walmart, highlighting how stock performance can influence fundraising and talent acquisition. However, Dr. Gray emphasizes that while momentum can be a powerful strategy, its successful implementation requires frequent rebalancing and is less suitable for retail investors due to tax implications and transaction costs. Ultimately, the episode concludes by suggesting that a blend of value and momentum strategies, coupled with careful risk management, offers a more robust approach to investing.