Investors have been seeking out high-quality companies for decades. The high-quality companies provide persistent profitability, low leverage and high return. Empirical evidences laud the merits of a Quality investment approach. What is agreed: higher profitability, more stable income and cash flows, and a lack of excessive leverage are the marks of quality companies.
Quality has demonstrated the ability to reward long-term investors. Similarly Quality tends to lag during low-quality rallies - or when the lowest-quality stocks lead the market in a rebound.
The demonstration of quality performance shows the comparison of different quality portfolios. Portfolios were rebalanced monthly using a market-cap weighted method, with 20 bps deducted as costs per transaction.
Annual Return |
Cumulative Return |
Volatility |
Sharpe ratio |
Calmar ratio |
Max Drawdown |
Omega ratio |
Sortino ratio |
Skew |
Kurtosis |
Tail ratio |
Monthly value at risk |
Alpha |
Beta |
SPY |
8.52% |
472.35 |
14.72% |
0.63 |
0.16 |
-52.56% |
1.61 |
0.94 |
-0.59 |
1.34 |
0.98 |
-0.06 |
0.00% |
1.00 |
Quality Score | Quality Profitability | Quality Growth | Quality Safety |
8.44% | 9.14% | 8.03% | 7.73% |
463.41 | 545.83 | 419.64 | 390.01 |
23.83% | 23.48% | 22.38% | 21.30% |
0.46 | 0.49 | 0.46 | 0.46 |
0.13 | 0.15 | 0.14 | 0.11 |
-66.51% | -60.27% | -58.53% | -67.33% |
1.49 | 1.52 | 1.48 | 1.47 |
0.72 | 0.80 | 0.71 | 0.70 |
0.02 | 0.34 | -0.13 | -0.08 |
5.64 | 5.67 | 4.62 | 5.00 |
1.27 | 1.27 | 1.10 | 1.08 |
-0.10 | -0.10 | -0.10 | -0.09 |
1.24% | 2.05% | 1.08% | 0.97% |
1.38 | 1.34 | 1.31 | 1.25 |