QUAL’s “key strength is that it invests in large-to-mid-cap US stocks that have generated high return on equity, carry low variability in earnings growth and have a low-debt-to-equity ratio relative to their peers over a five-year period. These qualities are usually associated with companies who have one of the leading positions in their respective sectors,” according to a Seeking Alpha analysis of the ETF.
Valuing high quality value is particularly important as bull markets enter their waning stages, as some market observers believe the current bull market is doing. In the early stages of bull markets, lower quality companies see their shares soar. However, as the bull matures, investors often exhibit a preference for higher quality fare with more compelling valuations.
Related: 3 High Octane Value Trades for a Bear Market
“QUAL really is about investing in a number of high quality stocks from different sectors, rather than an individual company or a single sector. In a tough business environment marked by declining earnings and geopolitical tensions which could get worse, QUAL could prove to be a promising pick,” adds Seeking Alpha.
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iShares MSCI USA Quality Factor ETF
