The fact that quality companies can, on average, generate an excess return over the overall market has been proven many times in the literature. Over the last 30 years, companies with good returns on capital and low debt ratios have significantly outperformed companies with poor financial ratios. This is true for small caps as well as for large caps.
What our equity funds have in common is that quality companies are our top priority. Why quality pays off in the long run, which criteria we apply and how our process differs from common index providers are discussed in more detail in our current "Insight".
In particular, we shed light on the following questions:
Why invest in quality stocks?
- Distinct competitive advantages, solid balance sheets and structural growth drivers form the basis for sustainable growth with high returns on capital.
What does "quality" mean to us?
- When defining "quality companies", we take a holistic approach that includes both qualitative and quantitative factors.
Are there "unprofitable companies" in our portfolios?
- No, basically not, but it depends on the overall context. Negative earnings or free cash flow figures in the short term can create added value for us as shareholders in the long term and therefore justify an investment.
Authors
Tim Gottschalk
Tim Gottschalk has been a Portfolio Manager at Berenberg since January 2022. He started his career in the Berenberg International Graduate Program with assignments in Asset Management, Wealth Management and Equity Research. Tim Gottschalk holds a Bachelor of Science in Business Administration and a Master of Science in Finance with Distinction from the University of Cologne with stays abroad in Dublin and Stockholm.
