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 |
8.33% |
369.63 |
14.31% |
0.63 |
0.16 |
-52.56% |
1.62 |
0.93 |
-0.66 |
1.80 |
0.98 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
8.92% | 9.42% | 9.60% | 9.67% | 9.49% | 9.42% | 10.08% | 11.20% | 11.26% | 11.17% |
421.43 | 470.14 | 488.29 | 495.41 | 477.52 | 469.68 | 540.80 | 678.25 | 686.86 | 674.75 |
23.91% | 20.75% | 20.62% | 19.35% | 17.59% | 16.65% | 16.29% | 15.26% | 15.67% | 16.84% |
0.48 | 0.54 | 0.55 | 0.58 | 0.61 | 0.63 | 0.67 | 0.77 | 0.76 | 0.72 |
0.13 | 0.15 | 0.15 | 0.16 | 0.18 | 0.18 | 0.20 | 0.32 | 0.33 | 0.24 |
-66.51% | -64.82% | -64.36% | -59.91% | -52.99% | -51.24% | -49.71% | -34.49% | -34.54% | -46.15% |
1.52 | 1.60 | 1.64 | 1.67 | 1.66 | 1.66 | 1.72 | 1.83 | 1.81 | 1.75 |
0.75 | 0.83 | 0.84 | 0.89 | 0.92 | 0.96 | 1.04 | 1.23 | 1.22 | 1.16 |
0.03 | -0.13 | -0.07 | -0.04 | -0.51 | -0.39 | -0.34 | -0.21 | -0.10 | 0.02 |
6.21 | 5.33 | 6.59 | 5.69 | 5.28 | 4.22 | 3.67 | 2.87 | 2.45 | 2.16 |
1.37 | 1.06 | 0.96 | 1.19 | 1.10 | 1.24 | 1.21 | 1.12 | 1.06 | 1.07 |
-0.10 | -0.09 | -0.09 | -0.08 | -0.07 | -0.07 | -0.07 | -0.06 | -0.06 | -0.07 |
1.65% | 2.48% | 2.62% | 2.91% | 2.95% | 3.18% | 3.87% | 5.13% | 5.05% | 4.78% |
1.40 | 1.25 | 1.25 | 1.18 | 1.11 | 1.04 | 1.02 | 0.96 | 0.99 | 1.04 |