Piper Sandler’s Chief Investment Strategist Michael Kantrowitz says investors should be focusing on high-quality stocks.If market trends over the last year continue, then he’s absolutely right.Quality-factor ETFs have delivered sound returns for investors over the last 12 months. For example, the Invesco S&P 500 Quality ETF (SPHQ) is up 27.5% since last June.For Kantrowitz, quality means companies with high profit margins, earnings growth and momentum, and highly stable balance sheets. Piper Sandler’s Macro Select model uses those four characteristics in its current iteration to identify attractive stocks.The model has an impressive track record. Over the last year, the S&P 500 stocks that rank in the top decile of the above qualities have beaten the overall index by 2.9%. Over the last five years, they’ve trounced the S&P 500 by 20.9%. The stellar returns track with the robust performance of quality factor ETFs over the last several months.But over the last 12 months, top-decile quality stocks in one sector in particular have vastly outperformed: healthcare.The S&P 500 healthcare stocks that rank in the top 10% in a model combining profit margins, earnings growth and momentum, and balance sheet stability have beaten the overall S&P 500 by an astounding 22% in the last year.Many stocks have shuffled in and out of the top decile over the last year. Below, we’ve listed the seven healthcare stocks that currently sit in the basket. Performance over the last 12 months and industry groups are also included. Of course, past performance is not necessarily an indicator of future results.…Read more by William Edwards
