Quality stocks surprise by underperforming in Europe

markets forum

European stock markets last year turned the accepted notion of quality holdings on its head as compa...

European stock markets last year turned the accepted notion of quality holdings on its head as companies with a good track record were penalised and those of poor quality and lower valuations did well. Olivier Lebleu, associate portfolio manager at MFS Investment Management, noted that from March 2003 onwards the 20 European companies with the highest return on equity (ROE) underperformed the market, while the 20 with the worst ROE outperformed. "We have been trying to get to the core of the notion of quality which has been put forward to explain return patterns we saw last year, and whic...