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 |
7.93% |
375.08 |
14.69% |
0.60 |
0.15 |
-52.56% |
1.57 |
0.87 |
-0.61 |
1.44 |
0.94 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
7.77% | 8.27% | 8.26% | 8.56% | 8.67% | 8.57% | 9.04% | 10.14% | 10.94% | 10.67% |
360.55 | 406.09 | 405.11 | 434.53 | 446.26 | 435.81 | 485.01 | 618.38 | 733.52 | 693.08 |
23.99% | 20.76% | 20.62% | 19.46% | 17.78% | 16.72% | 16.49% | 15.62% | 16.03% | 17.19% |
0.43 | 0.49 | 0.49 | 0.52 | 0.56 | 0.58 | 0.61 | 0.70 | 0.73 | 0.68 |
0.12 | 0.13 | 0.13 | 0.14 | 0.16 | 0.17 | 0.18 | 0.29 | 0.32 | 0.23 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.46 | 1.52 | 1.54 | 1.57 | 1.58 | 1.59 | 1.62 | 1.71 | 1.76 | 1.69 |
0.67 | 0.74 | 0.74 | 0.80 | 0.84 | 0.88 | 0.93 | 1.09 | 1.18 | 1.10 |
0.03 | -0.12 | -0.06 | -0.05 | -0.46 | -0.37 | -0.32 | -0.20 | -0.07 | 0.03 |
5.76 | 4.97 | 6.17 | 5.19 | 4.64 | 3.83 | 3.18 | 2.34 | 2.00 | 1.79 |
1.25 | 1.01 | 0.91 | 1.08 | 1.01 | 1.09 | 1.15 | 1.11 | 1.04 | 1.13 |
-0.10 | -0.09 | -0.09 | -0.08 | -0.08 | -0.07 | -0.07 | -0.06 | -0.07 | -0.07 |
1.25% | 2.07% | 2.11% | 2.45% | 2.72% | 2.91% | 3.36% | 4.55% | 5.15% | 4.74% |
1.39 | 1.22 | 1.21 | 1.17 | 1.10 | 1.02 | 1.02 | 0.96 | 0.99 | 1.05 |