You May Want to Fly to Quality

I did a good deal of reading this weekend. I had a lot of research that I had been putting off reading because they were too long or I simply didn’t have the time. As I read over this long weekend one big idea kept coming out and that was quality. Many firms were suggesting that if you were to buy right now, buy names that are high quality hen it comes to balance sheet and  earnings.  

If you needed some ideas on where the quality is then here are some exapmples from GS “Weekly Kickstarter”

Notice that most quality names are also extremely boring to own.

   
From BAML we see that in times of volatility that higher quality does tend to out perform and the higher up the credit scale you are then the better the performance. Those utilizes and telecoms aren’t looking so boring anymore.

 

 
This was a interesting chart from BAML, it shows the difference in forward PE of high quality and low quality. Notice that the spread between them blows up when the FED does any type of stimulance. BAML gave a stat along with this chart that I found to be very interesting “companies with the high net cash have traded at a 30% discount to those with high net debt since 2010”. With the FED now no longer easing ( for now who knows what will happen in the future) we may likely see these forward PEs swap. That as we get out of this stimulas higher quality names will excel. 

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