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 |
8.87% |
571.92 |
14.58% |
0.66 |
0.17 |
-52.56% |
1.64 |
0.98 |
-0.59 |
1.33 |
0.98 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
8.96% | 8.98% | 8.67% | 9.04% | 9.62% | 9.41% | 9.88% | 10.42% | 11.21% | 11.53% |
584.89 | 587.73 | 544.78 | 595.51 | 683.84 | 650.21 | 727.10 | 821.84 | 981.37 | 1055.52 |
23.44% | 20.32% | 20.18% | 18.99% | 17.44% | 16.53% | 16.31% | 15.55% | 15.97% | 17.10% |
0.49 | 0.53 | 0.51 | 0.55 | 0.62 | 0.63 | 0.66 | 0.72 | 0.75 | 0.73 |
0.13 | 0.14 | 0.13 | 0.15 | 0.18 | 0.18 | 0.20 | 0.30 | 0.32 | 0.25 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.51 | 1.56 | 1.56 | 1.60 | 1.65 | 1.64 | 1.68 | 1.72 | 1.76 | 1.74 |
0.76 | 0.81 | 0.79 | 0.85 | 0.94 | 0.97 | 1.03 | 1.13 | 1.21 | 1.19 |
0.01 | -0.13 | -0.07 | -0.06 | -0.47 | -0.37 | -0.32 | -0.21 | -0.08 | 0.01 |
5.80 | 4.96 | 6.16 | 5.27 | 4.59 | 3.62 | 3.01 | 2.10 | 1.78 | 1.58 |
1.31 | 1.03 | 0.95 | 1.15 | 1.04 | 1.14 | 1.17 | 1.10 | 1.09 | 1.15 |
-0.10 | -0.09 | -0.09 | -0.08 | -0.07 | -0.07 | -0.07 | -0.06 | -0.07 | -0.07 |
0.83% | 1.40% | 1.21% | 1.66% | 2.40% | 2.52% | 2.99% | 3.71% | 4.23% | 4.27% |
1.37 | 1.21 | 1.19 | 1.15 | 1.09 | 1.02 | 1.01 | 0.97 | 1.00 | 1.06 |