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 clearly to target stocks that exhibit superior profitability parameters and generate value for the shareholders through various markets and business cycles. These include profitability, cash flow and related attributes like Return on Investment, Return on Capital Employed, Interest Coverage among others that are derived from a company’s financial statements.

With these parameters, there is often a need to measure the performance of financials and non-financials differently and look at sector specific ratios for them.

The NJ Quality 100 Portfolio, an equal-weighted portfolio of 100 stocks, is constructed by tilting the float-adjusted capitalisation-weighted Nifty 500 TRI, the investable portfolio, towards 100 constituents with highest ranks based on a combination of profitability, leverage, and accruals based parameters

  EPS Variability (%) ROE (%) ROA (%)
NJ Quality 100 Portfolio 48.75 25.28 14.91
Nifty 500 TRI 66.53 16.76 8.23
  • Source: Internal research, Bloomberg, National Stock Exchange.
  • Factor parameters calculated as on 31st August 2022.
  • For Nifty 500 & NJ Quality 100 Portfolio factor definitions are the average of its constituents.
  • EPS variability is defined as the coefficient of variation of quarterly earnings per share of the last 3 years.
  • ROE is calculated by dividing the net income with the shareholders equity.
  • ROA is calculated by dividing the net income by total assets.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Quality 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Quality 100 Portfolio vs Nifty 500 TRI - 10yrs Returns

  • Source: Internal research, Bloomberg, National Stock Exchange of India
  • 10-Yr CAGRs are calculated for the period 30 September 2002 to 31st August 2022 and have been rolled on a daily basis.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Quality 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

One can see from the charts above that while there is some cyclicality in the performance of the quality factor, it appears to sustain a more stable relationship with the index. As with all other factors, efforts to improve the way quality is measured are continuously underway among academics as well as practitioners.

NJ Quality 100 Portfolio vs Nifty 500 - CAGR

  • Source : Internal research, Bloomberg, National Stock Exchange of India
  • CAGRs are calculated as the average CAGR based on the rolling CAGRs (rolled daily) calculated for the respective holding periods i.e. 1, 3, 5, and 10-Yr rolling CAGRs. The period for calculation is 30 September 2002 to 31 August 2022.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Quality 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Quality 100 Portfolio vs Nifty 500 - Return/Standard Deviation

  • Source : Internal research, Bloomberg, National Stock Exchange of India
  • The Return/Standard Deviation ratios have been calculated by dividing the respective rolling returns (rolled daily) by the standard deviation of the corresponding rolling returns, calculated over the period 30 September 2002 to 31 August 2022.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Quality 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Quality 100 Portfolio vs Nifty 500 - Maximum Drawdown

  • Source: Internal research, Bloomberg, National Stock Exchange of India
  • The Drawdown for a specific date has been calculated by dividing that day’s NAV of NJ Quality 100 Portfolio and Nifty 500 TRI by their peak NAVs up to that date, respectively.
  • Past performance may or may not be sustained in future and is not indication of future return.
  • NJ Quality 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
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