Friday, June 4, 2010

High Quality Stocks vs. The SP500

GMO's theme that high quality companies are the only value in the US market gets a boost from none other than First Eagle Funds (11% returns life of fund) and their research director Bruce Greenwald. Video interview and transcript via Morningstar's Ryan Leggio. See here.

While high quality may outperform on a relative basis go-forward, you can see that on days like today, everything goes down. That being said, I also expect this subset of the market to outperform. Junky stocks (high debt, no franchise) have had their run off the lows, just like they did in the last Crash. Time for franchise companies to show what their franchise is worth.

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