Equity
Income

The Enduring Case for Investing in Quality Companies

By Peter Hardy, CFA
MAY 28 | 2021
The right mix for you should provide the right amount of growth and stability for your situation, considering your age, tolerance for risk and future goals.

Key Takeaways

  • The potential for rising inflation and market volatility are top of mind for many investors. 

  • We think investment strategies that incorporate high-quality companies may be appropriate for those seeking to manage long-term risk.

  • Over time high-quality stocks have outperformed with less risk.

We believe the stocks of high-quality companies have the potential to enhance portfolio resilience and performance throughout the market’s ups and downs.

What Is a Quality Stock?

While there’s no universally accepted definition of quality, we consider various characteristics when evaluating the quality of companies, including:

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Strong Management Teams

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Leading market positions and strong brands

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Business models that provide steady streams of income

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High standards for environmental, social and corporate governance issues

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Low levels of debt that could help weather market downturns or acquire other businesses

Author
Peter Hardy, CFA
Peter Hardy, CFA

Vice President

Senior Client Portfolio Manager

The Enduring Case for Investing in Quality Companies

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

When portfolio managers incorporate Environmental, Social and Governance (ESG) factors into an investment strategy, they consider those issues in conjunction with traditional financial analysis. When selecting investments, portfolio managers incorporate ESG factors into the portfolio's existing asset class, time horizon, and objectives. Therefore, ESG factors may limit the investment opportunities available, and the portfolio may perform differently than those that do not incorporate ESG factors. Portfolio managers have ultimate discretion in how ESG issues may impact a portfolio's holdings, and depending on their analysis, investment decisions may not be affected by ESG factors.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.