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Quality Matters: Better Companies Equal Better Results

Quality Matters: Better Companies Equal Better Results

| September 22, 2020
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Not all growth companies are created equal. The best companies in the world are those that are consistently generating strong internal cash flows and growing revenues. They possess pristine balance sheets and are well managed with excellent leadership. They have also consistently demonstrated an ability to outperform their peers in both declining and advancing markets. The difference between such companies is well demonstrated when comparing the MSCI ACWI Quality Index to its less exclusive counterpart. The index aims to capture the performance of quality growth stocks by identifying stocks with high quality scores based on three main fundamental variables: high return on equity (ROE), stable year-over-year earnings growth and low financial leverage. Among its top holdings are Apple, Microsoft, Google, Visa and Nestle— all companies that experienced much less significant declines than the market indices in March and all companies that have outperformed indices and provided leadership for markets during the most recent economic resurgence.1

1 https://www.msci.com/documents/10199/9386d956-d8a5-4cf1-9eaa-fc597c10ad81

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