The Underperformance of Quality Persists

By on April 10, 2010

Mark Hulbert comments on the continued divergence of low quality stocks, which have been outperforming the higher quality names for quite awhile now.

To some observers, at least, this discrepancy between quality and junk suggests that the stock market right now is vulnerable to a decline. In any case, it also suggests that a safe bet going forward is to bet that the discrepancy between junk and quality will either narrow or even reverse itself — which is just another way of saying that the highest quality stocks will outperform the lowest quality issues.

Hulbert goes on to list several high quality stocks:

•Microsoft
•Johnson & Johnson
•Wal-Mart
•Hewlett-Packard
•Pfizer
•International Business Machines
•AFLAC
•Bristol-Myers Squibb
•PepsiCo
•3M Co

SMA Comment: For those who have missed out on the substantial rebound in the market, high quality stocks which have been laggards represent an opportunity to get some reasonably priced equity exposure.

Source: Marketwatch
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