‘Quality’ Stocks Aren’t What They Seem in This Market. What It Means for Investors.
Higher-quality companies haven’t produced the stock price returns investors normally expect. Classic market theory says shares of higher-quality companies—those with stronger brands, competitive barriers around their businesses, pricing power, cash-rich balance sheets, and high profit margins—hold up the best when stocks head south, as they have recently. The idea is that quality companies can more easily lift prices and maintain their sales figures, making them unlikely to lose money during a recession.