Momentum Top 15: the October 2026 book, a rough start, and what the backtest says to expect
2026-10-18 · SNDKMULITEMRNAWDCSTXDELLAMDINTCCIENCOHRTERMRVLBETWLO
Correction, Oct 19, 2026: the backtest figures in this note were updated to a stricter test that only counts stocks after they joined the S&P 500. The original version used today's members for the whole history and quoted 45.1% a year over the full period (62.9% out-of-sample, max drawdown -27.7%). The stricter test gives 17.0% a year over the full period (26.6% out-of-sample, max drawdown -25.3%). Holdings and month-to-date figures are unchanged.
Momentum Top 15 rebalanced at the 2026-09-30 close into 15 stocks at 6.7% each. Month to date through 2026-10-16, the book is -16.7% against +0.1% for SPY. That gap is large but not unusual for a concentrated momentum portfolio: in the backtest the worst peak-to-trough fall was -25.3%, and the strategy compounded at 17.0% a year over 2016-10 to 2026-09 (SPY 15.2%).
Thesis
- Momentum (owning recent winners, skipping the latest month) is one of the most-studied return patterns in markets; this model applies it mechanically to the S&P 500.
- The current book is concentrated: Information Technology accounts for 13 of 15 names, so its month-to-month path will follow that group.
- The rules do not change because of a bad month. The next rebalance re-ranks everything on the last trading day of the month.
What the data says
Exhibit 1: Holdings, signal and month-to-date move (signal = 12-1 momentum as of 2026-09-30; MTD from the 2026-09-30 close to 2026-10-16)
| Ticker | Company | Sector | 12-1 momentum | MTD |
|---|---|---|---|---|
| SNDK | Sandisk | Information Technology | +1296.3% | -25.3% |
| MU | Micron Technology | Information Technology | +473.9% | -17.5% |
| LITE | Lumentum | Information Technology | +462.2% | -15.1% |
| MRNA | Moderna | Health Care | +443.3% | +13.2% |
| WDC | Western Digital | Information Technology | +275.9% | -26.9% |
| STX | Seagate Technology | Information Technology | +252.7% | -30.7% |
| DELL | Dell Technologies | Information Technology | +225.8% | -16.0% |
| AMD | Advanced Micro Devices | Information Technology | +190.9% | -13.6% |
| INTC | Intel | Information Technology | +166.8% | -25.3% |
| CIEN | Ciena | Information Technology | +162.8% | -5.4% |
| COHR | Coherent Corp. | Information Technology | +157.9% | -19.1% |
| TER | Teradyne | Information Technology | +154.6% | -18.9% |
| MRVL | Marvell Technology | Information Technology | +152.3% | -13.8% |
| BE | Bloom Energy | Industrials | +143.9% | -20.1% |
| TWLO | Twilio | Information Technology | +135.4% | -16.4% |
Exhibit 2: Sector mix
| Sector | Names |
|---|---|
| Information Technology | 13 |
| Health Care | 1 |
| Industrials | 1 |
Changes at this rebalance vs 2026-08-31: bought MRNA, TWLO; sold AMAT, LRCX.
Exhibit 3: Backtest, after 10 bps trading costs per side (backtest only counts stocks after they joined the S&P 500)
| In-sample (2016-10 to 2021-12) | Out-of-sample (2022-01 to 2026-09) | Full | |
|---|---|---|---|
| Annual return | 9.0% | 26.6% | 17.0% |
| SPY annual return | 18.3% | 12.0% | 15.2% |
| Max drawdown | -25.3% | -24.4% | -25.3% |
| Sharpe (rf=0) | 0.53 | 0.91 | 0.73 |
The worst single month in the backtest was 2026-07 at -24.4% (SPY +0.0%). Turnover averaged 34% of the book a month. In-sample (2016-2021) the strict version trailed SPY; nearly all of its edge came after 2022.
Risks and what would change our mind
- Survivorship bias. The backtest only counts stocks after they joined the S&P 500, but companies later acquired or delisted are still missing, which still flatters past returns somewhat.
- Momentum crashes. Sharp market reversals hit recent winners hardest; a concentrated sector bet amplifies that.
- What would change our mind: sustained underperformance well beyond the backtest's worst stretch, or evidence that the signal has been arbitraged away. A single bad month is neither.
Sources and data as of
Prices: Yahoo Finance closes through 2026-10-16. Holdings and signals: Carré model run of 2026-09-30. Backtest: Carré research, 2016-10 to 2026-09, 10 bps per side. Hypothetical results; not advice. Written from stored data without an AI model.
Coteau Systematic Strategies publishes research, model portfolios and tools. It does not manage money or offer investment advice. Model results are hypothetical. Data: Yahoo Finance (delayed), SEC EDGAR.