The article, “FDMO: A Sophisticated, But Not Better Momentum ETF,” provides an analysis of the Fidelity Momentum Factor ETF (FDMO). This ETF follows a sector-neutral strategy based on price performance, earnings surprise, and short interest. The article highlights that FDMO is overweight in technology and large companies. Despite its sophisticated methodology, FDMO’s track record has been disappointing compared to other momentum ETFs with simpler approaches. The article examines FDMO’s portfolio holdings, performance, and compares it to other similar ETFs in the market. Overall, the article offers a comprehensive evaluation of FDMO and its potential as an investment option.

FDMO Overview

The Fidelity Momentum Factor ETF (FDMO) is an exchange-traded fund that aims to provide investors with exposure to high-momentum stocks within the U.S. market. FDMO implements a sector-neutral strategy, taking into account factors such as price performance, earnings surprise, and short interest. The fund tracks the Fidelity U.S. Momentum Factor Index and consists of 128 holdings.

FDMO Strategy

FDMO’s strategy is to select stocks with high momentum characteristics from the largest 1000 U.S. stocks based on market capitalization. The selection process evaluates four factors, each weighted differently, to calculate the momentum score: 12-month Return Minus 1-month Return (35%), Volatility-adjusted 12-month Return Minus 1-month Return (35%), 12- month Earnings Surprise (15%), and 12-month Average Short Interest (15%).

FDMO Portfolio

The FDMO portfolio is predominantly invested in large and mega-cap companies, comprising approximately 72% of the total asset value. The technology sector represents the highest weighting in the portfolio at 28.3%. Due to the sector-neutral methodology, the sector breakdown closely resembles that of the benchmark, which is the S&P 500 Index. The top 10 holdings in the FDMO portfolio account for 35.9% of its total asset value.

 

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