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Nine long-term quality stocks

With the share prices of highly rated stocks weakening recently, the Big Reliable stock screen pulls out another nine high-quality shares for long-term outperformance.
June 17, 2014

More often than not, the screens I run focus heavily on valuation metrics, but there is a school of thought that the most important thing investors should focus on for high returns over the long term is quality. A focus on valuation can actually be an impediment to such a strategy as the very best listed companies rarely look cheap on any conventional valuation metric. So avoiding premium ratings can be a mistake. My 'Big Reliable' stock screen, which I am now running for a fourth year, is an attempt to put the idea that 'quality will win out' into a screen.

While the screen has had some good runs over the year, the market has recently shown some aversion towards highly rated stocks and last year's screen underperformed the market. It produced a 3.5 per cent total return compared with the 6.7 per cent total return from the index from which the stocks were picked, the FTSE 350 (see table).

 

2013 stock performance

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