As an equity strategist, I constantly talk about investing in quality stocks but time and again, I notice that people mean something different when they talk about quality than what I mean when I talk about quality. When I use the term “quality”, I use it in the way it is commonly used in the factor investing and smart beta world. Quality stocks are stocks with high profitability, whether that profitability is measured as Return on Equity (my preferred measure), Return on Assets, Return on Invested Capital, or whatever profitability you may want to use.
What’s a quality stock?
What’s a quality stock?
What’s a quality stock?
As an equity strategist, I constantly talk about investing in quality stocks but time and again, I notice that people mean something different when they talk about quality than what I mean when I talk about quality. When I use the term “quality”, I use it in the way it is commonly used in the factor investing and smart beta world. Quality stocks are stocks with high profitability, whether that profitability is measured as Return on Equity (my preferred measure), Return on Assets, Return on Invested Capital, or whatever profitability you may want to use.