When should I rebalance a portfolio of SuperStocks

Last year, I looked at when to sell QM stocks: high-quality winners. I thought it would be interesting to expand the study to look at when to rebalance a portfolio of SuperStocks, the highest-ranked stocks on a combination of Quality, Value and Momentum.

The conclusion I came to for QM investors was that they could generate continued outperformance by holding a portfolio of QM stocks for up to four years:

It seems the quality factor continues to drive outperformance even after the initial momentum may have faded. After this period, holding further is likely to lead to underperformance. However, if an investor is interested in maximising compound returns, they should probably sell after a year, as the same graph on a log scale shows more clearly:

This is due to Momentum being a relatively short-lived phenomenon in terms of EPS outperformance, as the following graph from the Factors From Scratch

study shows:

Complicating matters is the challenge that Momentum is one of the best factors to trade in theory and one of the worst in practice....