The acceleration of earnings growth — companies reporting not just earnings beats but increasing rates of improvement in earnings growth.
Deeper Explanation
Driehaus focused on earnings momentum as the fundamental driver behind the best price momentum stocks. A company growing earnings at 15% is good. A company that grew earnings at 10%, then 15%, then 20%, then 30% — each successive quarter accelerating — is exceptional. This acceleration pattern signals a business entering a virtuous cycle: growing faster than analysts expect, causing upward revisions, attracting institutional buying, and driving price momentum. The sequence: earnings momentum (business reality) → analyst upgrades (recognition) → institutional buying (capital flows) → price momentum (the market outcome). Driehaus bought into this sequence as early as possible.
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