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Quality Factor

"Quality is never an accident. It is always the result of intelligent effort."
- John Ruskin

"It is hard to make a good return over the long term by investing in poor-quality or even average businesses."
- Terry Smith

Worried about your companies’ financial health? Consider the Quality Factor.

When used as a noun, "quality" describes how good or bad something is. However in common usage, the word "quality" is only associated with good things, and it is most frequently used to mean "high quality." A "quality company" is taken to signify a high-quality company, while a "quality product" is taken to mean a high-quality product. The one thing that distinguishes quality from all the other characteristics is that it is unrelated to the stock's current market price. It largely depends on non-market data, often the periodic financial reports issued by businesses.

Utilizing criteria such as profitability, earnings stability and growth, leverage, assets and investments, accruals and cash flows, among others, the Quality factor assesses the financial and accounting quality of businesses.

It follows logically that knowledgeable and rational investors are prepared to pay a premium for enterprises that have several of the qualities described above. This is also known as the "Quality Effect" or "Quality Premium," and it denotes the potential for high-quality equities to outperform their inferior counterparts over extended periods of time.

What is 'Quality' Investing?

Quality investing is a strategy where investors look for companies that have strong and enduring characteristics. These characteristics often include robust financial health, strong management,

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International experience with Quality Investing

Quality investing, as a strategy, focuses on selecting companies that exhibit robust and enduring characteristics, with an aim to achieve stable and consistent returns over the long term. Variou

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Indian Experience with Quality Investing

The performance of quality investing in the Indian market has been explored through various studies, providing insights into its effectiveness and comparison with other investment factors: 1.

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How is 'Quality' Measured?

The below table shows that quality factor commercial indices are not all the same. They have different inputs and methodologies, which often lead to different outcomes. Index De

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Does the Quality Factor work?

The inherent inconsistency in the definition of ‘quality’, make it difficult to gauge the true determinants of the quality premium i.e. the higher excess returns by high quality companies vi

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NJ's Quality Factor - NJ Quality+ Model

Both intuition and experience with the Quality factor are extremely strong. At the same time, one needs to choose the best parameters to ascertain the presence of quality carefully. The goal is

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Performance of select quality parameters:

At NJ AMC, an exhaustive examination of various quality parameters has been undertaken, revealing several robust metrics indicative of a company's financial robustness. Some of these metrics

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