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 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
8.59% | 8.79% | 8.56% | 8.90% | 9.42% | 9.16% | 9.68% | 10.58% | 11.47% | 11.47% |
476.38 | 499.60 | 473.20 | 511.94 | 577.99 | 543.55 | 612.32 | 746.83 | 904.73 | 903.92 |
23.87% | 20.67% | 20.46% | 19.26% | 17.65% | 16.67% | 16.46% | 15.61% | 16.05% | 17.23% |
0.47 | 0.51 | 0.51 | 0.54 | 0.60 | 0.61 | 0.65 | 0.72 | 0.76 | 0.72 |
0.13 | 0.14 | 0.13 | 0.15 | 0.18 | 0.18 | 0.19 | 0.31 | 0.33 | 0.25 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.49 | 1.54 | 1.55 | 1.60 | 1.63 | 1.63 | 1.67 | 1.74 | 1.79 | 1.74 |
0.73 | 0.79 | 0.77 | 0.83 | 0.91 | 0.94 | 1.00 | 1.14 | 1.23 | 1.17 |
0.02 | -0.12 | -0.06 | -0.06 | -0.47 | -0.37 | -0.32 | -0.20 | -0.07 | 0.03 |
5.62 | 4.83 | 6.12 | 5.23 | 4.61 | 3.70 | 3.06 | 2.21 | 1.88 | 1.65 |
1.27 | 1.03 | 0.93 | 1.11 | 1.01 | 1.13 | 1.19 | 1.14 | 1.09 | 1.15 |
-0.10 | -0.09 | -0.09 | -0.08 | -0.07 | -0.07 | -0.07 | -0.06 | -0.07 | -0.07 |
1.07% | 1.73% | 1.60% | 2.03% | 2.68% | 2.75% | 3.25% | 4.29% | 4.93% | 4.71% |
1.39 | 1.22 | 1.21 | 1.16 | 1.09 | 1.03 | 1.02 | 0.97 | 1.00 | 1.06 |