Impact Blog
EV Forward: High Quality

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By Joe Hudepohl, CFAPortfolio Manager, Atlanta Capital

      Atlanta - We deem stocks with steady earnings growth, modest debt/equity ratios and above-average return on invested capital to be high quality, and we typically find that companies with these financial characteristics have seasoned management teams and strong competitive positions in their key markets.

      While our consistent investment strategy throughout our 50-year history has been grounded on the recognition that financial quality has historically demonstrated impressive return and risk characteristics over the long term, low quality exhibited a relatively long stretch of outperformance in the strong equity markets of the past 10 years.

      For the trailing year through the third quarter, however, we see evidence that high quality stocks have started to retake the lead over low quality, leading to significant high quality outperformance during the past year.

      We look for this trend — with consistent growth and stability in earnings and dividends contributing to attractive long-term returns — to continue over the next year.