QLTY: Is It Time to Invest Like Jeremy Grantham?

Do you believe the S&P 500 is overpriced? If so, you agree with Jeremy Grantham and the herd of investors buying shares of the GMO U.S. Quality ETF (QLTY). 

Grantham, who is best known for his ability to identify market bubbles and his contrarian investment strategies, has a long track record of warning investors about overvalued markets, such as the technology bubble of the late 1990s and the housing bubble of the early 2000s. 

Actively managed by Grantham’s GMO Capital, the QLTY ETF's investment strategy aligns with GMO's broader approach, which focuses on identifying undervalued assets and investing in companies with strong fundamentals. GMO is a subsidiary of GMO LLC, a Boston-based investment management firm Grantham co-founded.  

Since its Nov. 2023 launch, QLTY has attracted more than $1 billion in assets, an impressive feat for an exchange-traded fund focusing on high quality stocks in a high growth environment. 

But QLTY’s rise in assets can be attributed to more than just a flight to quality by nervous investors as its 19% year-to-date performance eclipses the 18% gain on the SPDR S&P 500 ETF Trust (SPY). 

The recent attraction to QLTY also aligns with the soft-landing narrative, as investors seek investments that can provide positive returns in a slow-growth economy. 

Invest Like Jeremy Grantham With QLTY

QLTY (GMO U.S. Quality ETF) focuses on high-quality U.S. equities. It identifies companies with strong fundamentals and a proven record of profitability.  

The ETF's investment process involves a combination of quantitative and fundamental analysis to select companies with a sustainable competitive advantage and attractive valuation.  

How the QLTY ETF Works 

• Investment strategy: The ETF identifies and invests in companies with strong financial metrics, including return on equity, debt-to-capital ratio, and cash flow generation ability.  
• Active management: Grantham’s GMO Capital makes investment decisions based on its analysis of individual companies and market conditions.  

By focusing on high-quality companies, QLTY seeks to provide investors with a more defensive investment approach and focus on long-term value, reflecting Jeremy Grantham’s core investment philosophies. While this strategy can underperform the broader market when the growth style is in favor, it can outperform in a slower growth environment.