Hunting For The Right Quality ETF

October 23, 2019

Many Sectors Offer Quality, Not Just Defensive

In his blog, DeSpirito noted that investing in quality doesn’t necessarily mean investing in defense sectors only. Quite the contrary.

“We believe investors can find quality in every sector, and would caution that the popular wisdom doesn’t always apply,” he said. “Sectors traditionally associated with quality, such as consumer staples and utilities, generally are not screening high on our quality metrics today.”

“What sectors are scoring well on our quality screens today? Health care and technology stand out,” DeSpirito added. The latter defies the idea that quality can’t be found in cyclical sectors.”

In QUAL, SPHQ and OUSA, Apple sits at the top as the largest holding in all three portfolios. The funds also share a strong tilt toward cyclical sectors such as technology and consumer discretionary. QUAL has technology at 30% of the portfolio:

 

SPHQ tilts dramatically into technology—much more so than QUAL—in search of quality names within the S&P 500, and sector tilts can have a meaningful impact on performance:

 

OUSA, too, leads with “riskier” sectors, but technology sits at No. 2:

 

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