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 |
8.40% |
326.91 |
14.29% |
0.64 |
0.16 |
-52.56% |
1.64 |
0.94 |
-0.66 |
1.98 |
0.99 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
8.63% | 9.19% | 9.42% | 9.81% | 8.93% | 9.70% | 10.45% | 11.52% | 11.63% | 11.63% |
343.75 | 387.07 | 405.33 | 438.97 | 366.27 | 429.00 | 498.17 | 611.29 | 624.74 | 624.56 |
24.22% | 21.12% | 21.06% | 19.78% | 17.83% | 16.82% | 16.51% | 15.28% | 15.72% | 16.51% |
0.47 | 0.52 | 0.53 | 0.57 | 0.57 | 0.64 | 0.69 | 0.79 | 0.78 | 0.75 |
0.13 | 0.14 | 0.15 | 0.16 | 0.17 | 0.19 | 0.21 | 0.33 | 0.34 | 0.25 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.51 | 1.58 | 1.62 | 1.67 | 1.63 | 1.69 | 1.75 | 1.87 | 1.84 | 1.81 |
0.72 | 0.80 | 0.82 | 0.89 | 0.86 | 0.98 | 1.06 | 1.26 | 1.27 | 1.24 |
0.00 | -0.12 | -0.07 | -0.05 | -0.52 | -0.41 | -0.36 | -0.19 | -0.07 | 0.10 |
6.30 | 5.30 | 6.46 | 5.52 | 5.36 | 4.40 | 3.74 | 3.10 | 2.60 | 2.51 |
1.27 | 1.07 | 0.93 | 1.16 | 1.02 | 1.17 | 1.23 | 1.12 | 1.10 | 1.06 |
-0.11 | -0.09 | -0.09 | -0.08 | -0.08 | -0.07 | -0.07 | -0.06 | -0.06 | -0.07 |
0.96% | 1.88% | 2.08% | 2.67% | 2.11% | 3.19% | 3.97% | 5.27% | 5.24% | 5.08% |
1.45 | 1.29 | 1.29 | 1.22 | 1.13 | 1.06 | 1.03 | 0.96 | 0.99 | 1.03 |