Ankit Sharma
In everyday choices-be it food, clothing, schools, or airlines-we naturally lean toward what we trust as high quality. This instinct, however, is often overlooked in investing, where many chase short-term trends or low valuations, ignoring the long-term benefits of owning quality businesses.
Quality investing focuses on companies with strong fundamentals, ethical governance, and resilient business models. These firms consistently deliver high returns on equity (ROE) and return on invested capital (ROIC)capital, maintain low debt, and exhibit strong cash flows and prudent capital allocation. Beyond numbers, quality also includes brand strength, customer loyalty, innovation, and competitive advantages.
History has shown how lapses in quality-like product recalls or safety failures-can severely damage global brands. In contrast, high-quality companies enjoy customer stickiness, pricing power, and steady earnings, often thriving even during economic stress. With strong balance sheets and operational efficiency, they are better equipped to navigate inflation, rising costs, and tight credit.
Amid global uncertaintyand slower growth, investors are increasingly drawn to the stability that quality companies offer. Importantly, quality isn’t limited to any one sector or size. While consumer staples and IT are common examples, sectors like private banking, pharma, cement, and retail also feature strong candidates-spanning both large and small caps.
Interestingly, as quality stocks have recently lagged styles like value and momentum, many robust businesses are now trading at attractive valuations. This creates an opportunity for long-term investors to buy into quality at fair prices. However, quality investing isn’t about buying at any cost. Valuation discipline is key to balancing downside protection with long-term returns.
Ultimately, quality investing is a philosophy, not just a strategy. It brings consistency and peace of mind in an uncertain world.
One of the effective ways to invest in quality theme is through mutual funds.
Against this background, ICICI Prudential Mutual Fund has come up with a new offering-the ICICI Prudential Quality Fund, an open-ended equity scheme based on the Quality factor. It aims for long-term growth by investing in fundamentally strong companies with highreturn on equity(ROE) and return on invested capital (ROIC), low leverage, strong cash flows, and sound capital allocation, while maintaining reasonable valuations. The New Fund Offer (NFO) is open from May 6, 2025 to May 20, 2025.
(The writer is Co-Founder, Financial Mart, J&K)