During a strong bull market a rising tide lifts all ships is
the best way to describe stock performance.
Even the weakest of companies will often see their share price
increase in value. When the bull market slows and attention turns
back to the fundamentals of the individual stocks it is time for
investors to look at quality over quantity.
The iShares MSCI USA Quality Factor ETF (NYSE:
) uses a method to identify the highest quality mid-cap and
large-cap stocks. Stocks are given a score based on high return
on equity, stable year-over-year earnings growth, and low
financial leverage. The ETF is currently composed of 126 stocks
that meet the criteria set forth by the underlying index.
To Invest Like Warren Buffett, Learn to Think
Like Warren Buffett
The top holdings include Apple, Google and Exxon
Mobil. All three are large-cap stocks are considered leaders in
their respective sectors. The ETF is heavily weighted in the
information tech sector (35 percent) and consumer discretionary
Both sectors are often considered more aggressive cyclical
areas that will do well during strong bull markets. However, it
just so happens that the sectors are also the best positioned
based on current fundamentals.
Looking back at the performance of the ETF since its inception
in mid-July of this year, it is up 10.5 percent compared to a
gain of 7.1 percent for the S&P 500. With the current
allocation it is feasible to believe that QUAL can outperform
during the remainder of this bull market and during any
From a technical perspective QUAL has a bullish chart and has
strong support at the $54.50 area. As long as this bull market
continues investors should expect QUAL to join in the breakouts.
Any pullback of a couple percentage points could be considered a
long-term buying opportunity.
The ETF charges a minimal annual expense ratio of 0.15 percent
and has a 30-day SEC yield of 1.50 percent.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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