Joe Terranova
Scott Mullin | CNBC
Joe Terranova intends to stick to his successful quantitative approach. Virtus Terranova US Quality Momentum ETF (JOET) The idea is to identify stocks like Palantir early, before the rest of the market’s stocks pile up over the past five years.
The ETF, founded by Terranova, chief market strategist at Virtus Investment Partners, has gained 10.9% this year, outpacing last year’s 6.8% gain. Invesco S&P 500 Equal Weight ETF (RSP) At that time.
JOET, RSP year-to-date chart
To select ETF holdings, Terranova follows a strict set of rules-based principles. First, he and his team screen the 500 largest U.S. companies for stocks with the highest positive momentum, calculated using total returns over a 12-month period. The top 250 stocks are then included in the selection list.
Securities are then rated based on three quality factors: return on equity, debt-to-equity ratio, and annualized sales growth over the past three years. The top 125 stocks with the highest composite scores make up the equal-weighted ETF’s holdings.
The fund is not actively managed in the traditional sense, but is rebalanced quarterly. Terranova said he doesn’t miss out on the emotions when actively managing a fund because his rules-based strategy helps him capture alpha he might have missed out on otherwise.
“In January 2017, Palantir qualified. “I wasn’t in the S&P at this point because I haven’t been scrutinizing the S&P,” Terranova said on an episode of “The Compound and Friends” podcast with CNBC contributor Josh Brown, titled “Quality in the City, Momentum in the Sheets.” You’ve probably found six different times to sell that stock, strategy, and discipline. ”
Terranova estimated he bought Palantir’s stock when it was trading around $16.76. The analytical tool builder’s stock traded around $173 on Monday and has soared 129% in 2025.
The investor also appreciated that his approach had helped him capture the “personality” of the market and get into other themes early, such as the current healthcare rally. Conversely, Terranova’s strategy has also helped him sell positions he might otherwise have hung on to.
“I have more love for holdings that have been around for multiple quarters,” he told CNBC on the sidelines of a podcast episode. ”Tesla’s Great example. Tesla’s revenue growth flattened and I knew what was going to happen: I would sell Tesla. And on Halloween, this strategy liquidated Tesla, which looks like a pretty good move. ”
Going forward, Terranova plans to build a series of ETF products that apply his investment rules to other assets besides large-cap U.S. stocks, such as small-cap stocks and European stocks. He believes his strategy will continue to be successful and create core stock holdings and shock absorbers for investors’ portfolios.
“Momentum reflects technical confidence. Quality reflects fundamental confidence. And you want to invest around confidence,” Terranova told CNBC. “For me, that’s where long-term success lies.”
The JOET Fund has an expense ratio of 0.29% and approximately $240 million in assets under management.
