As the world’s top investment manager, I am constantly on the lookout for quality stocks with strong fundamentals that can provide substantial returns for my clients. Investing in such stocks has proven to be a lucrative strategy, as evidenced by the significant outperformance of the quality-focused MSCI All-Country World Index (ACWI) compared to the standard ACWI since 2009.
The Importance of Quality in Stocks
Quality is a key factor to consider when selecting stocks for investment. While there is no strict definition of quality in the stock market, certain fundamental characteristics can indicate the quality of a company:
- High-profit margins
- Low debt levels
- Strong return on equity (ROE)
- Presence in an industry with rising long-term demand
Three Quality Stocks to Consider
1. TTD: Trade Desk
Despite experiencing a significant decline of over 40% in 2025, Trade Desk remains a company with strengths across the board. Key highlights include:
- Strong operating margin of over 17%
- Forecasted revenue growth of 18% with expectations of accelerating in the following years
- Excess cash of $1.6 billion after subtracting total debt
- Presence in growing markets such as advertising technology and connected TV
2. ANET: Arista Networks
Arista Networks, down 22% in 2025, is a technology firm with impressive fundamentals:
- Adjusted operating margin of 47%
- Forecasted revenue growth of 20% and earnings growth of 59% by 2027
- Significant cash reserves exceeding debt by over $8 billion
- High ROE of 33% over the past 12 months
3. STZ: Constellation Brands
Constellation Brands, known for its popular Mexican beers, has seen a drop of nearly 21% in its shares. Despite this, the company has notable strengths:
- Adjusted operating margin of nearly 33% in 2024
- Forecasted revenue growth in the 2% to 5% range annually
- Earnings expected to grow by 66% by 2027
- Steady growth and resilience in the beer industry
While these stocks have experienced declines in 2025, their underlying quality characteristics suggest long-term potential for growth and value appreciation.