Joe Terranova’s Investment Strategies

Joe Terranova, the chief market strategist for Virtus Investment Partners, continues to champion a quantitative approach that has enabled his Virtus Terranova U.S. Quality Momentum ETF (JOET) to identify promising stocks like Palantir ahead of the market.

Performance of the JOET ETF

This year, the JOET ETF has seen a remarkable growth of 10.9%, outperforming the Invesco S&P 500 Equal Weight ETF (RSP), which has gained 6.8% during the same period. Terranova’s systematic approach has proven effective in capitalizing on market trends.

Stock Selection Methodology

Joe Terranova employs a rigorous, rules-based methodology to select the ETF’s holdings. His process begins by screening the 500 largest U.S. companies for those showing the highest positive momentum, based on their 12-month total returns. The top 250 stocks are then shortlisted for further evaluation.

Assessing Quality Factors

After identifying potential stocks, Terranova’s team evaluates them based on three critical quality metrics: return on equity, debt-to-equity ratio, and annualized sales growth rate over the past three years. The top 125 stocks with the highest composite scores become part of the equal-weighted ETF.

Quarterly Rebalancing and Emotional Detachment

Although the fund is not actively managed in the traditional sense, it undergoes quarterly rebalancing. Terranova appreciates the absence of emotional impulses associated with active management, crediting his disciplined strategy for capturing alpha that might have otherwise been overlooked.

Case Study: Palantir

Terranova highlighted Palantir as a key stock, revealing that he entered the position around $16.76. Today, Palantir shares are trading at approximately $173, reflecting an impressive 129% surge in 2025 alone. He recognizes that traditional management would have led him to sell earlier, something his strategy successfully mitigated.

Looking to the Future

Terranova’s forward-looking vision includes expanding his investment principles to create a series of ETF products focused on other asset classes such as small-cap stocks and European equities. He believes his strategic framework will maintain its effectiveness, serving as a core equity holding and a risk management tool for investors.

Investment Philosophy

In Terranova’s words, “Momentum is a reflection of technical confidence. Quality is a reflection of fundamental confidence.” He emphasizes the importance of investing around these confident indicators to achieve long-term success. The JOET fund boasts an expense ratio of 0.29% and manages approximately $240 million in assets, marking it as a viable option for both new and seasoned investors.