Josh Brown, a prominent figure in finance and CEO of Ritholtz Wealth Management, has unveiled a new investment product designed to cater to the growing appetite for concentrated portfolios. Named Porterhouse, after the premium steak cut, this separately managed account is focused on identifying and investing in what Brown considers the market’s top opportunities. The product employs a rules-based momentum strategy developed in collaboration with Franklin Templeton, prioritizing companies that demonstrate robust earnings growth and sustained share-price stability.
In a recent interview, Brown highlighted the shift in investor preferences as passive investing has gained traction, noting the ease with which investors can access broad market diversification at minimal cost. “It costs three basis points, one click and you can own the S&P 500,” he remarked. While he acknowledged the foundational role of broad market exposure in most portfolios, he emphasized that a certain segment of investors is searching for stocks with the greatest potential for returns.
Brown criticized the traditional strategy of simply investing in the largest market-cap companies, suggesting that this approach could be flawed. He pointed out that the leading stocks today are not guaranteed to maintain their positions in the future, highlighting the unpredictability of market dynamics.
The inception of Porterhouse stemmed from Brown’s previous work with his “Best Stocks in the Market” list for CNBC Pro, but it represents a more refined strategy. Notably, current holdings do not include any of the “Magnificent Seven” stocks—top-performing technology shares that have gained significant attention recently.
The momentum-driven approach of Porterhouse seeks to tap into collective investor behavior rather than relying on predictive modeling of market trends. “The market is very smart. I believe in the wisdom of crowds,” Brown stated, underscoring the potential for informed investor actions to create powerful market movements. He maintained that the strategy does not engage in forecasting, admitting uncertainty about what will emerge as key market themes in the future.
In practice, the strategy has already showcased its effectiveness, with stocks such as networking equipment company Ciena standing out as a significant success. Ciena has surged more than 140% this year, driven by demand for heightened networking capabilities in the context of AI infrastructure development.
Brown explained that momentum investing thrives as it often leads to continued interest in companies fueled by innovation and favorable market conditions. “In the end, companies that are doing well attract a crowd of buyers,” he noted, suggesting that successful firms typically maintain their appeal over time.
A distinctive feature of the Porterhouse account is its structure, which offers greater flexibility compared to conventional momentum ETFs. Unlike typical exchange-traded funds that remain fully invested, Porterhouse can hold cash when stocks do not meet its sell criteria. “We’d rather hold cash than hold a stock that’s going down less than the market,” Brown explained, emphasizing a disciplined approach to investment.
The capability to raise cash during market downturns may result in periods of being under-invested, particularly following significant sell-offs. However, Brown believes this strategy is preferable to retaining weaker positions simply for the sake of remaining fully invested.
Beginning June 1, Porterhouse will be available to qualified clients of Ritholtz Wealth Management, marking a new chapter in Brown’s investment offerings aimed at harnessing optimal market opportunities for discerning investors.
