S&P 500 High Quality Index

Today I learned that S&P tracks a “High Quality” segment of the S&P 500. Wow, you really do learn something new every day. There’s also a “Low Quality” segment.

Since I’m a big proponent of investing in high-quality stocks, I wanted to check out this index. There are currently 135 stocks in the S&P 500 High Quality Index.

This is how S&P describes it:

The S&P Quality Rankings System measures growth and stability of earnings and recorded dividends within a single rank. Scores have been calculated on common stocks since 1956. S&P 500® High Quality Rankings are designed for exposure to constituents of the S&P 500 identified as high quality stocks – stocks with Quality Rankings of A and above.

There’s an ETF that tracks the index under the symbol SPHQ.

Here’s a chart of the High Qual index (blue line, right scale) along with the S&P 500 (red line, left scale).

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I scaled the two axes to have the same proportions. Just by looking at this, it appears that High Qual isn’t as volatile. Sure enough, I calculated the beta and came up with 0.946.

Now here’s the High Quality index divided by the S&P 500. This is somewhat similar to the relative performance of our Buy List.

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High Qual got crushed during the last 10 months of 2007. Since the cycle low on July 14, 2008, High Qual has done very well beating the S&P 500, 107.98% to 72.66%.

I also looked at the total return numbers. High Quality usually has a higher return from dividends, but the effect isn’t that great.

Posted by on May 28th, 2015 at 9:25 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.