What is quality investing?
Quality investing is an investment strategy that focuses on financially sound companies that have a history of solid earnings.
Investing in quality companies is an approach that can be traced back to world-renowned Economist and mentor to Warren Buffet, Benjamin Graham. In his book The Intelligent Investor first published in 1949, Graham said investors should demand from a company “a sufficiently strong financial position and the potential that its earnings will at least be maintained over the years.”
Such companies, Graham stated, show resilience by falling less in a downturn and recovering to previous highs quicker than other companies. Numerous academic research supports this. Analysis also shows that while a quality investing approach does tend to behave defensively in downturns, this approach also tends to perform strongly in bull markets. This is why quality investing is known as a strategy for “all seasons”.