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 |
8.77% |
497.21 |
14.71% |
0.65 |
0.17 |
-52.56% |
1.63 |
0.96 |
-0.60 |
1.37 |
0.98 |
-0.06 |
0.00% |
1.00 |
Quality Score | Quality Profitability | Quality Growth | Quality Safety |
8.59% | 9.30% | 8.31% | 8.01% |
476.38 | 562.25 | 445.50 | 414.13 |
23.87% | 23.52% | 22.39% | 21.30% |
0.47 | 0.50 | 0.47 | 0.47 |
0.13 | 0.15 | 0.14 | 0.12 |
-66.51% | -60.27% | -58.53% | -67.33% |
1.49 | 1.53 | 1.49 | 1.48 |
0.73 | 0.81 | 0.73 | 0.72 |
0.02 | 0.34 | -0.14 | -0.09 |
5.62 | 5.65 | 4.64 | 5.02 |
1.27 | 1.27 | 1.10 | 1.08 |
-0.10 | -0.10 | -0.10 | -0.09 |
1.07% | 1.91% | 1.06% | 0.96% |
1.39 | 1.34 | 1.31 | 1.25 |