When volatility threatens, consider a high-quality equity approachFebruary 25, 2020By Joe Hudepohl, CFAPortfolio Manager, Atlanta Capital and Peggy Taylor, CFAInvestment Specialist, Atlanta CapitalAtlanta - 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.1In 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 termTaking 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.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.