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MTUM: An Analytical Look at Its Momentum Holdings

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Nov. 12 2015, Updated 10:08 a.m. ET

MTUM investment methodology

The iShares MSCI USA Momentum Factor ETF (MTUM) is based on its index, the MSCI USA Momentum Index. According to the fund’s prospectus, the risk-adjusted momentum of each stock is calculated by dividing its excess return over the risk-free rate by annualized standard deviation. Each stock is then assigned a momentum z-score.

The weight of each underlying index constituent is determined by multiplying the security’s momentum score by its free-float market capitalization. MTUM currently manages a total net asset of $980.2 million distributed mainly in the consumer discretionary, information technology, and healthcare sectors.

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Holdings analysis

The top five holdings of MTUM are Amazon.com (AMZN), Facebook (FB), Visa (V), Starbucks (SBUX), and The Home Depot (HD). The consumer discretionary sector, which singlehandedly represents 30.7% of the fund, is trading above its 20-day, 50-day, and 100-day moving averages. Strong earnings from the consumer discretionary sector have boosted its performance. The average earnings from this sector have considerably beaten analysts’ estimates of 5.8%.

The information technology sector, which is the second largest component of MTUM, is trading above its 20-day moving average by a significant margin of 5.8%. The entire information sector of the market is trading above its 20-day moving average by 1.7%, riding on its strong earnings report and beating analysts’ estimates by 5.9%. The utilities sector, which forms a small part of MTUM, is trading below its 20-day moving average due to weak earnings and the economic environment.

In the next part of this series, we’ll look at the effect of adding MTUM to your portfolio.

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