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STRATxAI

December 2024 · 5 min read

Building a quality strategy with Xplore Stocks

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This is our sixth article showing how to use Xplore Stocks to build your own investment strategy and this article will focus on a quality factor as opposed to a value strategy. Descriptions of all the metrics we surface to our users can be found Xplore glossary.

As we have discussed in a previous quality post, over the last decade from 2010-2020 the quality factor has performed reasonably and offered some diversification. Naturally it struggled to keep pace with the S+P 500, which was driven by a strong quantitative easing tailwind and a tech/growth trend. However, given the pullback in the markets and the new inflationary environment, various market commentators have mentioned that quality stocks, with strong balance sheets and robust earnings could do well going forward. Investment bank JP Morgan equity research team have mentioned this

Our outlook is unchanged across factors: We continue to see generally attractive prospects for a wide range of factors; equity value remains especially attractive, as do equity quality and equity momentum in U.S. markets

Likewise Blackrock Andrew Ang has again been emphasising that quality, in addition to value, may be nice additions to your portfolio.

BlackRock’s Fundamental Equities team recently discussed why now may be the time to stock up on quality. Quality stocks may provide resilience when markets are volatile, or the business cycle is maturing. Like value, quality stocks are also cheap relative to the broad market.
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