Contrarian Investor: Quality rules… or does it?

Is the FTSE 100 a classic cyclical play or a quality stock lover's nirvana? The index is seen by many as an overly cyclical index, which is dependent on interest rates and oil prices, but the contrarian investor might take a different view.

The FTSE 100 arguably boasts a world class collection of quality stocks, with relatively low levels of volatility and decent returns.  I recently analysed five classic quality stocks (Reckitt, BAT, Diageo, Unilever and Imperial) plus a higher-quality defensive stock, National Grid. These six stocks have contributed a chunky 23% of total returns for the FTSE 100 index over the past five years. Looking at the returns, it is easy to see why so many investors have rushed into a quality trade. Over the five years, they have all returned more than 50%, with low levels of realised volatility...