Episode summary
Buy High, Sell Higher | We Asked Travis Prentice Why 52-Week Highs Are a Buy Signal, Not a Warning
Excess Returns
· · 59 min · Guests: Travis Prentice
Summary
Travis Prentice argued that the market is undergoing major structural shifts, not a temporary blip, and that those changes are showing up in extreme dispersion beneath the index level. He pointed to a split between semiconductors and software, the broadening out beyond the Mag 7, and the recent alignment of value and momentum as evidence that AI, deglobalization, and reshoring are changing which sectors and styles benefit. He said momentum is simply a discipline of reacting to what is working, not what should work, and that this environment rewards investors who stay balanced across momentum, value, and quality.
He also made the case that passive investing has changed the definition of risk. In his view, many investors now focus too much on tracking error versus the S&P 500, while the real risk is loss of capital or failing to meet long-term return needs. Prentice said market-cap-weighted indexes can become increasingly disconnected from fundamentals as flows reinforce the biggest names, which is why he sees diversification across active and passive as a risk-management tool rather than an ideological choice.
On factor design, Prentice said quality is under pressure because AI may compress software margins and favor more capital-intensive businesses. He also described new research showing that 52-week highs are a powerful momentum signal, sometimes better than the standard 12-minus-1 framework on a risk-adjusted basis. In his view, combining signals and using a more recency-biased momentum lookback can improve results in a faster-moving market.
Key takeaways
- Prentice said the market’s dispersion reflects durable shifts from AI and deglobalization, not just short-term volatility.
- He argued that passive investing has turned tracking error into the wrong risk metric and can mask real concentration risk.
- He said momentum works because it adapts to what is actually rising, while value and momentum are again working together in a broader market.
- Prentice said quality is being challenged by AI-driven disruption, especially in software where margins and expectations may reset.
- He found that 52-week high signals explain a large share of momentum returns and can improve downside capture versus standard momentum alone.
Notable quotes
“I think these are major shifts that aren't just a blip. I think they're kind of major moves that signify very big changes going on”
“All you're doing is reacting to what's actually working”
“the adage of buy high sell higher seems to be accurate”
How the episode opens
I think these are major shifts that aren't just a blip. I think they're kind of major moves that signify very big changes going on. And I think it has profound implications for how we invest.
As a momentum investor, you don't really care or you don't really think about what should be working. All you're doing is reacting to what's actually working. On Wall Street, we have a really uh interesting characteristic that we take really good ideas and grown so big that they come become less good ideas over time.
The real risk hiding in plain sight, right, with with the rise of passive and the fact that these companies have been bit up so much for so long and they you could argue whether how far away from fundamentals they are and it all wouldn't matter unless there's a change agent and I think the change agent is is AI.
Welcome to Excess Returns. I'm Jack Forehand and today I am privileged to be joined by another factor investor uh Travis Prentice, the uh CIO of Informed Momentum Company, a second time guest on the podcast. Uh Travis, thank you for coming back on.
Yes, thank you for having me. Big fan of the podcast.
Thank you so much. Um and yeah, I'm excited. We've had we've got a wide variety of topics even if you're not a factor investor today.
Um we're going to talk about we've all been seeing this crazy dispersion behind the scenes in the market. We're going to talk about how Travis is seeing that from a factor investor's lens. We're going to talk about passive investing.
We're going to talk about Mike Green's work. We're going to talk about AI in the world quality in the world of AI.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai driven market shift
- deglobalization
- passive investing risks
- momentum signals
- factor investing quality and valuation
Companies and tickers mentioned
- Informed Momentum
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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