Josh Brown, counting on a new momentum strategy, thinks investors want more than index funds

• The momentum strategy currently holds 58 stocks and can hold cash when positions violate sell rules, unlike most ETFs that remain fully invested
• Ciena Corp, a networking equipment maker benefiting from AI infrastructure buildout, has been one of the strongest performers with shares up over 140% in 2026
• Brown argues that while low-cost index funds remain portfolio foundations, the dominance of passive investing has created demand for selective strategies that can adapt as market leadership changes

Summary

Josh Brown, CEO of Ritholtz Wealth Management and CNBC contributor, has launched Porterhouse, a separately managed account (SMA) offering a concentrated, rules-based momentum strategy. Developed in partnership with Franklin Templeton, the product launches June 1 for qualified Ritholtz clients and aims to capture market-leading stocks beyond traditional low-cost index funds.

Key Strategy Details

Porterhouse focuses on companies with strong earnings growth and persistent momentum, currently holding 58 stocks—notably excluding major names from the "Magnificent Seven." The strategy evolved from Brown's stock list for CNBC Pro but employs a more selective approach. Unlike typical momentum ETFs that stay fully invested, Porterhouse can hold cash when stocks violate sell rules, providing greater flexibility.

Market Philosophy

Brown argues that while broad market index funds costing "three basis points" remain portfolio foundations, investors increasingly seek concentrated exposure to top-performing stocks. He emphasizes that "the best stocks today won't be the best stocks tomorrow," warning that historically, "buying the largest market-cap company is actually a terrible strategy."

The approach relies on momentum as a factor, trusting the "wisdom of crowds" rather than attempting thematic forecasting. Brown stated: "I have no idea what's going to be the dominant theme of the market in the second half of 2026."

Performance Example

Ciena Corp, a networking equipment maker, exemplifies the strategy's AI infrastructure play, surging over 140% in 2026 as data centers demand greater networking capacity. Brown noted the portfolio includes multiple industrials, materials, and technology names benefiting from AI-driven earnings revisions.

The launch reflects evolving demand beyond passive investing popularized by Vanguard founder Jack Bogle.