IQLT - Decisive Factors - Understanding The Drivers Of Equity Returns
2024-04-27 08:00:00 ET
Summary
- Stocks have been buoyant this year, but market conditions are still in flux.
- Looking at equity factors can help investors make informed judgments about how allocations are prepared for different scenarios.
- High-quality US stocks have been on a winning streak that began in earnest at the start of 2023 and has continued into this year.
Quality Factors Add Fortitude for Evolving Economic Conditions
Past performance does not guarantee future results. *Factor returns are calculated by the relative performance of the top quintile cohort versus the bottom quintile cohort within the S&P 500. Return on equity (ROE): Last 12 months (LTM) net income divided by LTM average shareholder's equity. Return on assets (ROA): LTM net income divided by LTM average total assets. Interest coverage: LTM earnings before interest and taxes divided by LTM interest expense on debt plus interest capitalized. Price to free cash flow (P/FCF): Current share price divided by LTM free cash flow per share. High beta: The regression between the monthly stock return and the monthly market return over the last five years. Debt to equity: Total debt divided by total shareholder equity. Book yield: Book value per share divided by current share price. Negative earnings: Performance of stocks with negative earnings. Left display as of April 17, 2024; right display as of February 29, 2024 (Source: Piper Sandler and AllianceBernstein (AB))
