The Case for Investing in High-Quality Stocks

It turns out you can put a price on quality. A study finds that high-quality stocks beat lower-quality issues over the long term. What's more, high quality tends to do best when you really need it: in bear markets. Even better, the study concludes that high-quality stocks are cheap right now.
See Also: Tactics That Help Patient Investors Prosper. The Leuthold Group, a Minneapolis-based research firm, found that high-quality stocks returned an annualized 13.1% from the start of 1986 through March 2014. By contrast, low-quality stocks returned an annualized 10.0% over the same period, and Standard & Poor's 500-stock index returned an average of 10.6% per year.

What's "high quality"? Like so many investment terms, it suffers from imprecision. Almost everyone seems to define high-quality companies slightly differently, but healthy profit margins and low debt are always common threads. Leuthold's current high-quality list includes such sturdy stocks as Apple (symbol AAPL), Berkshire Hathaway B (BRK.B), Costco (COST), Colgate-Palmolive (CL), ExxonMobil (XOM), UnitedHealth Group (UNH) and Whole Foods Market (WFM).

Source: Kiplinger

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