Jason Zweig
speaker
906 appearances
17 recordings
1 series
first heard Jan 2018
last heard Sep 2022
Jason Zweig’s voice in public audio — every appearance, attributed to the second.
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Quality stocks as a whole have underperformed the overall market by...
Oh, one, two, maybe three percentage points on average, which might not be so bad, except with the market down 20% as a whole, being down more than 20% in what you believed were the best stocks can be kind of painful.
My pleasure.
Thanks for having me, JR.
It kind of is what it sounds like, companies that are very high quality, typically low debt, high profitability, and in theory, you would expect them to be resistant to a downturn.
And some examples of companies that might be regarded as high quality today would be, you know, Apple, Google, Facebook in technology, or Pfizer in healthcare, Procter & Gamble in consumer products.
You know, companies that are extraordinarily healthy financially have a dominant position in their industry and tend to be highly profitable.
Well, so far in 2022, they've been disappointing.
Quality stocks as a whole have underperformed the overall market by one, two, maybe three percentage points on average, which might not be so bad, except with the market down 20% as a whole, being down more than 20% in what you believed were the best stocks can be kind of painful.
Why haven't they done well?
Well, there's two reasons.
One is in a market downturn, it's perfectly natural for investors to sell the easiest to sell stocks first.
So the biggest, best companies are the ones where people can most easily raise cash.
So they will sell those first.
And then the second reason is that a lot of these companies just got kind of overpriced.
because quality doesn't come cheap.
Another thing investors should bear in mind is that quality is not, well, it's not an objective quality, right?
To some extent, it's subjective.
Different money managers define quality in different ways.
Some might say it's companies that are highly profitable, which frankly is the classic definition.
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