Impact Blog
When volatility threatens, consider a high-quality equity approach

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 and Peggy Taylor, CFAInvestment Specialist, Atlanta Capital

      Atlanta - Recent events remind us that equities can be a volatile asset class. Should the markets continue to be volatile or decline, the impact on asset prices may prove dramatic. We believe current market volatility signals a healthy reminder that applying a long-term view and being selective and differentiating between higher- and lower-quality companies may be beneficial when volatility rises.1

      In our view, investing in higher-quality companies with a demonstrated history of consistent growth and stability in earnings is a time-tested strategy with the potential to provide attractive risk-adjusted returns across varying market conditions.

      Focus long term

      Taking the long view, on a historical basis, high-quality stocks have outperformed low-quality stocks for the one-, three- and five-year periods ended December 31, 2019, on an annualized basis, as well as for 20- and 30-year periods. Of course, this past performance is not necessarily indicative of future results.

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      Higher-quality companies typically have consistent earnings, strong balance sheets, significant free cash flow generation, growing revenues and meaningful competitive advantages. While higher-quality businesses delivering more predictable earnings results have natural appeal in most market environments, we believe they merit particular attention in times of greater uncertainty.

      Bottom line: Higher-quality businesses delivering more predictable earnings results have natural appeal in most market environments, but we believe they merit particular attention in times of greater uncertainty.