Dashan Huang is an Assistant Professor of Finance at the Lee Kong Chian School of Business at Singapore Management University. His paper "Twin Momentum" looked at combining traditional price momentum with improving fundamentals to generate market outperformance. In the paper, he identified seven fundamental variables (earnings, return on equity, return on assets, accrual operating profitability to equity, cash operating profitability to assets, gross profit to assets and net payout ratio) that he combined into a single fundamental momentum measure. He showed that stocks in the top 20% of the universe according to that measure outperformed the market going forward. When he combined that measure with price momentum, he was able to double its outperformance.
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Validea used the investment strategy outlined in the paper Twin Momentum written by Dashan Huang to create our Twin Momentum Investor portfolio.
This strategy looks for stocks with strong fundamental and price momentum. Fundamental momentum is determined using a combination of seven variables: earnings, return on equity, return on assets, accrual operating profitability to equity, cash operating profitability to assets, gross profit to assets and net payout ratio. Price momentum is determined using the most recent twelve month period excluding the latest month. When these two types of momentum were combined together, Huang found that the result was significant outperformance over the market.