Skip to main content
EN
Investment strategies

Quality investing

Quality investing looks for companies with high, stable returns on capital, strong balance sheets and steady earnings.

Jump to another part of the path?

Quality investing looks for companies with high and stable returns on capital, little debt and earnings that hold up in bad years. The idea is that such businesses can compound their value for a long time, so it is worth paying a fair - not necessarily low - price for them.

Typical signs

Return on invested capital consistently above about 15 %, stable or rising margins, strong free cash flow, modest debt, and a clear advantage over competitors such as a brand, a network or high switching costs.

The risk

Quality is widely sought, so these shares are often expensive; paying too much can lead to weak returns even if the business does well.

This content is general information, not investment advice.