John Blood has a nice article in Investment Advisor magazine entitled “Factor Investing: A Post-Modern Portfolio Theory.”
In a previous article I talked about “Factor Investing: Small and Value Factors.” In this article I would like to highlight another factor, that of “profitability” which is sometimes called “quality” instead.
This latest factor of investing is relatively new, having been “discovered” relatively recently in papers by Robert Novy-Marx (2012) and Fama/French (2015).
Unlike size and value, quality has no universally accepted definition.
The rough idea is that the stock price of companies that are profitable are more …Read More