291:. Only stocks that are believed to generate high future profits and a strong growth in earnings per share are admitted to a Growth investor's portfolio. The share price at which these anticipated profits are bought, and the fundamental basis for growth, are secondary considerations. Growth investors thus focus on stocks exhibiting strong earnings expansion and high profit expectations, regardless of their valuation. Quality investors, meanwhile, favor stocks whose high earnings growth is rooted in a sound fundamental basis and whose price is justified.
276:. Certain valuation coefficients, such as the price/earnings and price/book ratios, are key elements here. Value is defined either by valuation level relative to the overall market or to the sector, or as the opposite of Growth. An analysis of the company's fundamentals is therefore secondary. Consequently, a Value investor will buy a company's stock because he believes that it is undervalued and that the company is a good one. A quality investor, meanwhile, will buy a company's stock because it is an excellent company that is also attractively valued.
65:, was the first to recognize the quality problem among equities back in the 1930s. Graham classified stocks as either Quality or Low Quality. He also observed that the greatest losses result not from buying quality at an excessively high price, but from buying Low Quality at a price that seems good value.
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As a rule, systematic quality investors identify quality stocks using a defined set of criteria that they have generally developed themselves and revise continually. Selection criteria that demonstrably influence and/or explain a company's business success or otherwise can be broken down into five
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According to the BCG matrix, the business model of a quality company is usually classified as star (growing business model, large capex) or cash cow (established business model, ample cash flows, attractive dividend yield). Having a competitive advantage, quality company offers good product
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Evaluation of corporate management execution is mainly based on soft-criteria assessment. Quality company has professional management, which is limited in headcount (6-8 members in top management) and has a low turnover rate. Its corporate governance structure is transparent, plausible and
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quality company possesses an economic moat, which distinguishes it from peers and allows to conquer leading market position. The company operates in the industry which offers certain growth potential and has global trends (e.g. ageing population for pharmaceuticals industry) as tailwinds.
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based on a set of clearly defined fundamental criteria that seeks to identify companies with outstanding quality characteristics. The quality assessment is made based on soft (e.g. management credibility) and hard criteria (e.g.
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and Stars) or two Non-quality classes (Question Marks and Dogs). Other important works on quality of corporate business can be found primarily among the US management literature. These include, for example,
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According to a number of studies the company can sustain its quality for about 11 months in average, which means that quantitative and qualitative monitoring of the company is done systematically.
148:. These corporate collapses focused investors’ awareness on quality, which may vary from stock to stock. Investors started to pay more attention to quality of balance sheet,
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are key attributes of quality company. Quality company tends to demonstrate positive financial momentum for several years in a row. Earnings are of high quality, with
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The quality issue in a corporate context attracted particular attention in the management economics literature following the development of the
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Valuation ultimately is related to quality, which is similar to investments in real estate. Attractive valuation, which is defined by high
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and expert attestations. Later the concept was applied to investments in enterprises in equity markets.
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stability). Quality investing supports best overall rather than best-in-class approach.
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Quality investing is an investment style that can be viewed independent of
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Quality as an
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Quality investing gained credence in particular after the burst of the
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Quality
Investing - Owning the best companies for the long term
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515:Systematische Investments in Corporate Excellence
39:The idea for quality investing originated in the
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555:; Eide, Torkell T.; Hargreaves, Patrick (2016).
326:"insights on quality investing - Northern Trust"
76:in 1970. Using the two specific dimensions of
204:Solid balance sheet, high capital and sales
537:Study by Dr. Wolfram Gerdes. November 2009.
51:of potential investments are determined by
369:"Following Buffett for Idiot-Proof Growth"
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272:is based first and foremost on stock
253:Comparison to other investment models
228:not growing faster than sales etc.
160:Identification of Corporate quality
84:, the matrix allocates a company's
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513:Weckherlin, P. / Hepp, M. (2006).
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559:. New York: Harriman House Ltd.
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133:" by Lawrence Cunningham
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232:5. Attractive valuation:
129:" by Jim Collins. and "
82:experience curve concept
553:Cunningham, Lawrence A.
391:In Search of Excellence
198:accordingly organized.
95:In Search of Excellence
489:Lawrence A. Cunningham
202:4. Financial Strength:
169:1. Market Positioning:
416:Competitive Advantage
350:, New York: Collins.
107:Competitive Advantage
45:real estate investing
236:discounted cash flow
226:accounts receivables
214:operating cash flows
193:Corporate Governance
154:corporate governance
24:investment strategy
16:Investment strategy
289:earnings per share
287:and the company's
595:Financial markets
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503:978-0-85719-501-2
494:Quality Investing
478:978-0-06-662099-2
454:978-0-88730-739-3
131:Quality Investing
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238:(DCF), low
222:inventories
185:value chain
119:Jim Collins
585:Investment
579:Categories
312:References
268:Nowadays,
218:net income
216:exceeding
210:cash flows
78:life cycle
74:BCG matrix
285:forecasts
274:valuation
244:P/B ratio
240:P/E ratio
156:quality.
90:Cash Cows
491:(2016).
467:(2001).
442:(1994).
413:(1985).
388:(1982).
344:(1949).
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146:Worldcom
86:products
80:and the
279:Modern
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53:ratings
35:History
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