Individual Investors

Insights

High Quality Stocks Improve in Q3

10/15/2014

We believe the high double-digit equity returns of the last five years will normalize in the mid-to-high single-digit range going forward, but remain attractive relative to other asset options. Returns of this magnitude will be more in line with the fundamental performance of many companies, which are growing revenue and earnings at this rate even in the slow growth global environment.

Our focus is on high-quality businesses, which have the potential to do well in both good and bad times. During the third quarter, higher quality companies started to perform much better than lower quality companies as high yield credit spreads widened (see chart below). Further, we saw larger companies beginning to invest in many smaller companies, as exemplified by the takeovers of Dresser Industries and Sigma Aldrich, and partial takeover of Monster Beverage.

Read Kayne Anderson Rudnick’s Q3 Market Review.

High Quality Following High-Yield Spreads
Source: Strategas
Data provided through October 8, 2014 and is assumed to be reliable.
Past performance is no guarantee of future results.

The S&P 500® Index is a market capitalization-weighted index which includes 500 of the largest companies in leading industries of the U.S. economy. The index is unmanaged and not available for direct investment.

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.