What is a Quality Investing approach?
Quality Investing centers around the idea of investing in companies displaying superior business characteristics. While some characteristics may be financially driven such as the strength of the balance sheet, others might lean more qualitative such as management capabilities.
Although somewhat simplistic in its definition, in practice it is difficult to pin down. Accounting idiosyncrasies, market sentiment, unknown economic headwinds, etc. all serve to make this anything but a simple endeavor.
We take a decidedly quantitative approach, focusing primarily on a company’s ability to generate returns in excess of the cost to build and maintain itself as evidenced by their financials. This underpins everything we do within our CoreQ™ approach to Quality Investing.
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Building Better Haystacks
An Adjusted ROIC Framework for Quality Investing
Over the last thirty years the growth of passive indexing has been nothing short of prolific. But, with the major of the “index” lagging the index itself New West explored a fundamentals driven methodology to remove as much of this lagging cohort as possible while still retaining the benefits of indexing.
Based on a company’s return on invested capital (ROIC), the framework offers an unbiased way to select the top performing company’s while demystifying much of the subject aspects of Quality Investing.