The outperformance of stocks that look
Posted: Thu Jul 10, 2025 5:33 am
With “risk-on” the operative slogan for the quarter, investors continued to move away from
defensive names and into riskier and more economically sensitive issues. The 20% ofstocks in the S&P 500 index with the highest beta outperformed the 20% with the lowestbeta by about 17%. Similarly, stocks that don’t pay a dividend (about 16% of the total)
outperformed stocks with the highest dividend yields by over 15%. In addition, the topquintile of stocks in the S&P 500 Index with the greatest variability in their earningsoutperformed the top quintile of stocks with the least variability by 13%.
As might be
expected, growth stocks outperformed value stocks, with the Russell 1000 Growth Indexoutperforming the Russell Value Index by about 3.5%.
Our stock selection model worked well in the shop quarter. We divide the metrics for our stockselection model into three broad categories: valuation (fundamental measures such as
earnings and cash flow relative to market values), catalyst (price momentum and businessmomentum) and quality (quality of earnings and financial strength). For each of the
categories, the 20% of stocks with the highest ranks within the category outperformed the20% with the lowest ranks within the S&P 500 Index. The spread was most pronounced inour quality measures, with about an 8% performance spread, followed by our valuation
measures, with a 7% spread. inexpensive relativeto their peers may appear contradictory at first. However, many of the stocks that rallied inthe first quarter had been beaten down in the “risk-off” period and had attractive valuations
that were poised to rebound once the market’s appetite for risk increased. Although our
catalyst top-to-bottom quintile spread was positive, it was only by about 2%, and stocks
with both high-catalyst scores and low-cataly
defensive names and into riskier and more economically sensitive issues. The 20% ofstocks in the S&P 500 index with the highest beta outperformed the 20% with the lowestbeta by about 17%. Similarly, stocks that don’t pay a dividend (about 16% of the total)
outperformed stocks with the highest dividend yields by over 15%. In addition, the topquintile of stocks in the S&P 500 Index with the greatest variability in their earningsoutperformed the top quintile of stocks with the least variability by 13%.
As might be
expected, growth stocks outperformed value stocks, with the Russell 1000 Growth Indexoutperforming the Russell Value Index by about 3.5%.
Our stock selection model worked well in the shop quarter. We divide the metrics for our stockselection model into three broad categories: valuation (fundamental measures such as
earnings and cash flow relative to market values), catalyst (price momentum and businessmomentum) and quality (quality of earnings and financial strength). For each of the
categories, the 20% of stocks with the highest ranks within the category outperformed the20% with the lowest ranks within the S&P 500 Index. The spread was most pronounced inour quality measures, with about an 8% performance spread, followed by our valuation
measures, with a 7% spread. inexpensive relativeto their peers may appear contradictory at first. However, many of the stocks that rallied inthe first quarter had been beaten down in the “risk-off” period and had attractive valuations
that were poised to rebound once the market’s appetite for risk increased. Although our
catalyst top-to-bottom quintile spread was positive, it was only by about 2%, and stocks
with both high-catalyst scores and low-cataly