A Technical-Fundamental System for Stock Selection

Grant Henning—a trader, author and former university professor—believes that market trends will dictate whether to weight a stock portfolio toward value and earnings stocks or momentum and growth stocks. He also believes that the equity market goes through “predictable” patterns. By recognizing these patterns, he feels that it is possible to identify periods where it is advantageous to own stocks and when it is not.

Henning considers himself a swing trader, holding stocks for as little as a day or two or as long as a couple months. Having such a narrow trading window, in his opinion, allows him to take advantage of price fluctuations.

For his own trading, Henning defines success as averaging a 10% gain, per month, on his invested capital. If he fails to achieve this goal over an extended period of time, he will re-evaluate the system to see if adjustments are necessary or whether he needs to adopt an entirely new system.

In his book “The Value and Momentum Trader” (John Wiley & Sons, 2010), Henning begins by outlining first the technical and then the fundamental models he has developed. Henning’s research indicates that his technical-momentum factors performed better during bull markets while his fundamental-value variables tended to do better during bear markets. Being a pragmatist, and knowing that neither bull nor bear markets last forever, he developed a trading model that combines elements of both models into a hybrid fundamental-technical methodology.

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