Momentum vs Value in 2026: Which Strategy Wins?

The Eternal Debate: Momentum vs Value

If you could only choose one investment factor for the rest of your life, would you pick Momentum or Value? This question has divided the investment community for decades, and the answer is more nuanced than most pundits suggest.

Momentum — the tendency of stocks with strong recent performance to continue outperforming — was first documented by Jegadeesh and Titman in 1993. The strategy is elegantly simple: buy winners, sell losers. It works because of behavioral biases like herding, anchoring, and the slow diffusion of information. Stocks that are going up tend to keep going up — until they don't.

Value — buying stocks trading below their intrinsic value based on fundamentals — traces its intellectual lineage to Benjamin Graham and David Dodd's 1934 masterwork, Security Analysis. The value premium exists because investors systematically overpay for glamorous growth stocks and undervalue boring, cheap ones. Value investors profit from this behavioral mispricing — buying dollars for fifty cents.

Both factors have robust academic evidence supporting their long-term premiums. The Fama-French three-factor model (1993) enshrined Value as a systematic risk factor, while Carhart (1997) added Momentum as a fourth factor. Together, these four factors explain the vast majority of stock return variation.

But here is the critical insight that most investors miss: Momentum and Value are negatively correlated. When Value is underperforming (as it did in 2018-2020), Momentum is typically outperforming, and vice versa. This negative correlation makes them powerful complements in a portfolio — a fact that Blank Capital's composite model exploits by including both factors.

Historical Context: When Each Strategy Outperforms

Understanding the historical context of each factor's performance helps set expectations for 2026 and beyond. Here is a decade-by-decade breakdown:

The pattern is clear: neither factor wins consistently. Over the full 2000-2025 period, both Momentum and Value delivered approximately 3-5% annual excess returns above the market — but with dramatically different timing. An investor who committed 100% to either factor would have endured multi-year periods of severe underperformance.

2026 Market Environment Analysis

The 2026 investing landscape presents a nuanced environment for both Momentum and Value investors. Several key macro factors shape the outlook:

Our assessment: both strategies have merit in 2026. Momentum benefits from continued AI and technology trends, while Value benefits from elevated rates and widening valuation spreads. The optimal approach is to hold both — which is exactly what our composite model does.

Head-to-Head: Top Momentum vs Top Value Stocks

Let us look at the actual data. Below are the top 5 stocks ranked by Momentum score and the top 5 ranked by Value score from Blank Capital's universe. All stocks shown have a composite rating of Strong Buy or Buy, ensuring fundamental quality.

Top 5 Momentum Stocks

Top 5 Value Stocks

Side-by-Side Comparison

Notice the key differences: Momentum stocks tend to cluster in Technology and growth-oriented sectors, while Value stocks are more diversified across Financials, Healthcare, Industrials, and other cyclical sectors. This sector divergence is one reason the two factors are negatively correlated — they naturally pull portfolios in different directions.

Why Combining Both Factors Outperforms Either Alone

The research of Asness, Moskowitz, and Pedersen (“Value and Momentum Everywhere,” Journal of Finance, 2013) provides the strongest evidence for combining these factors. They found that across stocks, bonds, currencies, and commodities in dozens of countries, Value and Momentum premiums are negatively correlated. This means combining them creates a natural hedge that dramatically reduces portfolio risk without sacrificing returns.

Here are the key statistics from our own backtest data (January 2022 – present, U.S. equity universe):

The combined strategy delivered 3-5% higher annual returns than either factor alone, but the real story is risk reduction. The maximum drawdown dropped from -38% to -42% (pure factors) to just -22% for the combination. The Sharpe ratio — the gold standard for risk-adjusted returns — jumped from roughly 0.80 to 1.21, a 50% improvement.

This is not a coincidence. It is the mathematical consequence of combining two return sources that are negatively correlated. When Momentum suffers a crash (as it did in 2009 and 2020), Value often rallies, cushioning portfolio losses. When Value languishes (as it did in 2015-2019), Momentum's strong returns keep the portfolio growing.

The “Barbell” Portfolio Strategy

The practical implementation of combining Momentum and Value is what we call the “barbell” approach. Just as a physical barbell has weight on both ends and a thin bar in the middle, a barbell portfolio overweights both extremes — the fastest-trending stocks (Momentum) and the cheapest stocks (Value) — while underweighting the bland middle.

Here is how to construct a barbell portfolio using Blank Capital's data:

1. 1Select 10-15 Momentum Leaders: Use the screener to find stocks with Momentum scores above 80 and composite ratings of Strong Buy or Buy. These will be your growth engine — stocks riding strong trends with institutional support.
2. 2Select 10-15 Deep Value Picks: Screen for stocks with Value scores above 80, P/E below 15, and Quality scores above 50 (to avoid value traps). These are your contrarian bets — cheap stocks with solid fundamentals that the market is underpricing.
3. 3Equal-Weight Within Each Sleeve: Allocate roughly 50% of your equity portfolio to each group. Equal-weight the individual positions (3-5% each) to avoid concentration risk in any single stock.
4. 4Rebalance Quarterly: Every quarter, refresh both lists using updated rankings. Momentum stocks should be replaced when they lose trend (score drops below 50). Value stocks should be sold when they reach fair value (P/E normalizes).
5. 5Monitor Factor Scores: Use Blank Capital's individual stock pages to track factor score changes. A Momentum stock whose score is declining may be about to experience a trend reversal — the most dangerous event for momentum investors.

This approach lets you capture both factor premiums without having to predict which one will outperform in any given quarter. When Momentum runs hot, that sleeve carries the portfolio. When Value mean-reverts, the value sleeve provides the boost. Over time, both contribute to returns, and the negative correlation between them smooths the ride.

Conclusion: The Answer Is Both

The Momentum vs Value debate frames the question incorrectly. It is not about choosing sides — it is about understanding that both factors deliver genuine, persistent premiums through fundamentally different mechanisms, and that combining them is mathematically superior to betting on either one alone.

In 2026, Momentum has a slight edge due to continued technology trends, but Value is positioning for a potential multi-year recovery as valuation spreads normalize. The smart money is not trying to time this rotation — it is capturing both premiums simultaneously.

Blank Capital's stock rankings already do this for you. Our 6-factor composite model gives both Momentum and Value significant weight, along with Quality, Stability, Growth, and Short Interest. The result is a single, actionable score that tells you which stocks have the best multi-factor profile — no factor timing required.

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