Earning from earnings

Can you blame any investor for chasing profits? At its heart, earnings momentum is betting on companies witnessing blistering earnings growth. The belief is that the growth rate will continue, the surge in earnings will attract investors and price appreciation will follow eventually. You may be wondering how riding an earnings wave is different from growth investing. The devil is in the details, and in this case, it's the time frame. Growth investing is akin to a marathon, where investors look at profit expansion over several years. It's a long-haul commitment. In contrast, earnings momentum is more of a 100-metre dash. Here, investors focus on recent performance, examining just the past few quarters. Driven by optimism, they place their bets, hoping to ride the short but potentially lucrative wave of earnings acceleration. Why it works Unlike price momentum, earnings momentum is not a byproduct of the market's herd mentality. Every company has a story being written, and the trends in their earnings are unique chapters in their story. So, the drivers of earnings momentum are multifaceted, ranging from new market opportun