The main lessons from “Quality-Driven Growth: An Enduring Combination”
Lazard Asset Management’s paper “Quality-Driven Growth: An Enduring Combination” is packed full of insights. Unfortunataly it's now been taken offline.
Here are the main lessons:
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1/ Quality stocks have beaten both the broader market and growth and value styles for the last 20 years, both internationally and in the US.
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2/ Investors perfectly able to time the switch in 2009 from value to growth would have done better if they had just invested in quality all along.
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3/ The durability of a company’s competitive advantage is important to long-term returns. Here are the type of advantages to look for
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4/ Revenue is not the only way to measure growth. Instead focus on financial productivity as a measure of the quality. Look for companies that produce high levels of cash flow and can reinvest that cash to produce even more.
5/ High financial productivity is the driver of the earnings stability, cash generation, and low financial leverage that typify quality companies.
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