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 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
8.44% | 8.53% | 8.30% | 8.66% | 9.12% | 8.89% | 9.47% | 10.26% | 11.16% | 11.10% |
463.41 | 472.92 | 448.38 | 487.71 | 543.41 | 515.29 | 588.74 | 703.21 | 856.30 | 844.39 |
23.83% | 20.66% | 20.45% | 19.25% | 17.66% | 16.68% | 16.46% | 15.63% | 16.07% | 17.26% |
0.46 | 0.50 | 0.49 | 0.53 | 0.59 | 0.60 | 0.63 | 0.71 | 0.74 | 0.70 |
0.13 | 0.13 | 0.13 | 0.14 | 0.17 | 0.17 | 0.19 | 0.30 | 0.32 | 0.24 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.49 | 1.53 | 1.53 | 1.58 | 1.61 | 1.61 | 1.65 | 1.71 | 1.76 | 1.71 |
0.72 | 0.77 | 0.75 | 0.81 | 0.89 | 0.92 | 0.98 | 1.11 | 1.20 | 1.14 |
0.02 | -0.12 | -0.06 | -0.05 | -0.46 | -0.36 | -0.31 | -0.19 | -0.07 | 0.03 |
5.64 | 4.81 | 6.10 | 5.21 | 4.55 | 3.66 | 3.04 | 2.17 | 1.85 | 1.61 |
1.27 | 1.03 | 0.93 | 1.12 | 1.02 | 1.12 | 1.19 | 1.14 | 1.09 | 1.15 |
-0.10 | -0.09 | -0.09 | -0.08 | -0.08 | -0.07 | -0.07 | -0.06 | -0.07 | -0.07 |
1.24% | 1.74% | 1.62% | 2.05% | 2.63% | 2.72% | 3.27% | 4.20% | 4.86% | 4.59% |
1.38 | 1.22 | 1.21 | 1.16 | 1.09 | 1.03 | 1.02 | 0.97 | 1.00 | 1.06 |