Insights | 21 December 2018

Quality Equities: The Solution to Today's Equity Conundrum

Executive Summary

Ten years into a bull market, the conventional wisdom is that U.S. stocks are richly valued based on most well-cited metrics. Fortunately, solid investment opportunities remain in places that some value investors may find surprising. This is why the GMO Quality Strategy remains fully invested in equities. We invest globally, yet the portfolio holds primarily U.S. domiciled companies. Nearly half of the portfolio is invested in technology stocks. And rather than invest in beaten up value stocks, the portfolio trades at an aggregate P/E in line with the S&P 500. But price is not value. We believe these securities, selected through a fundamental bottom-up process that focuses on quality companies, are valued to deliver solid returns with below market levels of risk.

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Disclaimer: The views expressed are the views of Tom Hancock through the period ending December 2018, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. Forward‐looking statements based upon the reasonable beliefs of the author and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated.
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