Richard Driehaus: The Father of Momentum Investing Who Bought High and Sold Higher

Last reviewed: August 2026. Sources: Jack Schwager’s The New Market Wizards, the American Association of Individual Investors, Forbes, Barron’s, and public records of Driehaus Capital Management.

Every beginner learns the same slogan before they learn anything else: buy low, sell high. It sounds like wisdom. Richard Driehaus spent forty years proving it can be a trap. His entire career rested on the opposite instinct — buy stocks that are already expensive and rising, then sell them when they get more expensive still. He called it a discipline. The value crowd called it reckless. The returns settled the argument.

Driehaus did not invent momentum, but he turned it into a repeatable, institutional-grade process and earned the label that stuck for the rest of his life: the father of momentum investing. To understand what he actually did — and where copying him will hurt you — you have to look past the slogan and into the machinery.

From a paper route to the top 1% of fund managers

Driehaus started young. By thirteen he was buying stocks with money from his paper route, teaching himself the market through investment newsletters long before he had any formal training. He went on to DePaul University in Chicago, earning both a bachelor’s degree and an MBA.

His conversion moment came from a book — John Herold’s writing on America’s fastest-growing companies. That is where Driehaus locked onto the idea that would define him: over the long run, earnings growth is the single force that drives a share price. Not sentiment, not story, not cheapness. Earnings, and the market’s changing expectations of them.

He worked his way through brokerage firms including Mullaney, Wells & Co. and Jesup & Lamont, and at one early stop became the youngest portfolio manager at his firm, ranked among the top 1% of his peers by an independent fund-evaluation service. In 1980 he launched his own brokerage, Driehaus Securities. Two years later, in 1982, he founded the firm that carried his name and his method for decades: Driehaus Capital Management. Over the era Schwager documented, the record was extraordinary — a compounded annual return reported in excess of 30%, net of all fees, sustained across roughly twelve years.

The method: buy strength, demand earnings, cut losers fast

Driehaus’s process rested on three pillars that reinforced each other.

Price strength as the first signal. He deliberately hunted stocks already making significant upward moves. To Driehaus, a rising price was not something to fear — it was often the first visible sign that something genuinely good was happening inside a company that the broader market had not fully priced yet. He preferred the risk of buying a stock at new highs to the risk of buying one in decline. His largest position ever, Home Shopping Network, illustrated the philosophy perfectly: he ignored the IPO price and began buying heavily only after the stock had already run into the $40s and $50s, riding it past $100 before selling when the growth story cooled.

Accelerating earnings as the confirmation. Price drew his attention; earnings sealed the decision. He did not want stable, mature businesses. He wanted companies whose rate of earnings growth was itself increasing quarter over quarter, throwing off strong positive earnings surprises and sharp upward revisions to analyst estimates. Small- and mid-cap firms were his hunting ground precisely because a small company can grow earnings 20% far more easily than a giant already doing hundreds of billions in sales.

Fast exits as the survival mechanism. The engine that made buying high survivable was a ruthless willingness to sell. When a position stopped working, Driehaus retreated and cut the loss short, living to fight another day. He was untroubled by his win-loss ratio; a strategy of chasing volatile momentum leaders produces plenty of small losers. What mattered was that the winners were allowed to run until their momentum burned out, while the losers were killed early and cheaply. To do that, he accepted much higher portfolio turnover than conventional managers thought respectable.

The defining lesson: cheapness is not safety

The heart of Driehaus’s contribution is a reframe that still unsettles new traders. The value tradition treats a low price as a margin of safety and a high price as danger. Driehaus argued the opposite is frequently true. A stock in decline can keep declining for reasons the buyer cannot see; a stock at new highs is often being repriced by people who do see something. Trying to catch the exact bottom, he believed, was a fool’s errand that felt intelligent and cost fortunes.

His willingness to “buy high and sell higher” was not bravado. It was a considered bet that in the moment when a company’s earnings are accelerating, the crowd is usually late, not early — and that the safest place to be is inside a confirmed uptrend backed by improving fundamentals, with a fast exit ready the instant the trend or the earnings break down.

Where the Mind · Method · Money framework meets Driehaus

Method is the obvious fit, and it is a clean one. Driehaus gave momentum a rulebook: buy demonstrated price strength, require accelerating earnings and positive surprises as confirmation, concentrate in small- and mid-caps where growth is possible, and turn the portfolio over as fast as the trends demand. A modern breakout trader running relative-strength scans is walking a path he paved.

Money is where his edge was quietly built. Buying expensive, volatile stocks is only survivable because of the exit. Cutting losers short and letting winners run is a risk-management stance before it is a stock-picking one, and it is the reason his indifference to win rate never blew him up. The asymmetry — many small controlled losses funding a handful of large wins — is pure position-sizing discipline.

Mind is the hardest and least discussed. Momentum investing demands that you act against the instinct that feels safest. Every fibre says buy the cheap thing and avoid the expensive one; Driehaus trained himself to do the reverse, and to sell a stock he still liked the moment its momentum failed. That is emotional control disguised as a stock-selection style.

The honest counterweight

Driehaus’s record is real and his influence enormous, but copying him naively is dangerous. Several things deserve to be said plainly.

Momentum is regime-dependent. It works brilliantly in trending markets and gets slaughtered in choppy, mean-reverting ones. The 30%+ figure came from a specific span of decades that were unusually kind to small-cap growth; it is not a promise about any future window. Momentum strategies are known for sharp, brutal drawdowns when leadership reverses, and Driehaus survived those only because his exits were faster and more disciplined than most people can execute under stress.

The strategy also relies on high turnover, which means high transaction costs, tax drag, and constant attention — a professional’s game run inside a firm with research staff and infrastructure. The volatile small-caps that gave Driehaus his returns are exactly the stocks where a retail trader’s slippage, poor fills, and emotional whipsaws do the most damage. And Driehaus never wrote a book laying out his exact system; the widely used “Driehaus screens” are third-party reconstructions, not his own disclosed rules. Treat them as inspired by him, not authored by him.

Finally, buying high and selling higher only works if you actually sell. Strip out the fast, unemotional exit and you are left with the pure act of chasing expensive stocks — which is how most people who imitate momentum investors lose money.

What to actually take from Driehaus

You do not need a Chicago fund to use what Driehaus proved. Three ideas transfer directly.

First, stop treating a rising price as a reason to stay away. Strength can be information. A stock at new highs backed by accelerating earnings is often safer than a “cheap” stock falling for reasons you cannot see.

Second, let fundamentals confirm what price suggests. Driehaus did not buy strength blindly; he demanded accelerating earnings and positive surprises underneath the move. Price plus improving earnings is a far higher-quality signal than either alone.

Third, make the exit the non-negotiable part of the plan. His entire aggressive style was survivable only because losers died young. Copy the exit discipline before you copy the entry aggression, or the aggression will bury you.

Frequently asked questions

Who is Richard Driehaus?
Richard Driehaus was an American fund manager, founder of Chicago-based Driehaus Capital Management, and the investor most often credited as the father of momentum investing. He was featured in Jack Schwager’s The New Market Wizards and named to Barron’s “All-Century” team in 2000. He died in March 2021.

What is momentum investing in Driehaus’s sense?
Identifying stocks already in a strong upward price move, buying them, and staying with them as long as the move continues — fuelled by accelerating earnings growth, positive earnings surprises, and rising analyst estimates, with fast exits when the trend or the earnings break.

Did Driehaus really “buy high and sell higher”?
Yes. He deliberately bought stocks at or near new highs rather than trying to catch bottoms, on the reasoning that a rising price is often the first sign of positive fundamental change the market hasn’t fully priced.

What returns did he achieve?
Public sources report a compounded annual return in excess of 30%, net of fees, over roughly a twelve-year span. Figures like this describe a specific historical period and are not a forecast of future results.

What kinds of stocks did he favour?
Small- and mid-cap growth companies — roughly $50 million to $3 billion in market cap — with strong, sustained and accelerating earnings growth and meaningful positive earnings surprises.

Is momentum investing safe for beginners?
No. It carries sharp drawdowns in choppy markets, demands high turnover and disciplined fast exits, and concentrates in volatile stocks where retail traders lose the most to slippage and emotion. The exit discipline matters more than the entry.

Did Driehaus write a book about his method?
No. He never published his exact system. The popular “Driehaus screens” are third-party reconstructions of his approach, not rules he personally disclosed.

Continue learning

• Mark Minervini — the modern champion who built a full system around price strength and earnings-driven momentum.
• Nicolas Darvas — the dancer whose box theory was momentum investing before it had a name.
• Kristjan Kullamägi — today’s breakout trader running Driehaus-style relative strength on a modern screen.
• William Eckhardt — the mathematician who proved the exit and the bet size matter more than the entry.
• Market Wizards (book review) — our full breakdown of the Schwager series Driehaus appears in.
• The Mind · Method · Money framework — the lens we use to read every trader on this site.