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Investment Returns to Quality in Developed Markets

  • Permanent losses of capital emanate from purchase of low quality securities at times of favorable business conditions.
  • A basket of Quality stocks generates superior investment returns compared to publicly traded benchmarks and does so with significantly lower risk.
  • We believe market participants systematically underestimate the duration of competitive advantage of Quality businesses leading to superior subsequent investment performance.
  • Existence of sustainable competitive advantage is a crucial component of a Quality business.
  • A simple three factor model based on Return on Equity, Free Cash Flow, and Leverage generates superior returns with lower risk.

Investment Returns to Quality Developed Markets

 

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