Value Investor: How to spot quality stocks

High-quality companies are more likely to provide higher shareholder returns and are typically better at withstanding market volatility. Here's what to look for.

At StocksInValue, we focus on ‘quality’ companies for investment. Conservative portfolios should prefer quality companies because they are more likely to provide higher total shareholder returns (from steady growth in intrinsic value and higher dividends); less likely to downgrade earnings forecasts; less likely to require dilutive equity raisings or run out of cash and enter administration; and typically less volatile in the sharemarket than low-quality companies.

Quality companies have several common features.

The first is a high and recurrent return on equity. The more productive a firm’s equity, the higher the dividends it can sustain and the faster it can grow intrinsic value.

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