Top fund manager Chuck Royce says we’ve entered a phase in the bull market in which high quality stocks should outperform.
Royce tells WealthTrack’s Consuelo Mack that high-quality stocks have underperformed during the bull by a significant margin, because the Federal Reserve’s quantitative easing program gave advantages to lower quality firms that could take advantage of refinancing options. Now, with QE winding down, Royce expects high-quality stocks to outperform. He says that his definition of “high quality” are non-leveraged companies generating high returns on capital. Royce also says that right now, valuations for a “decent section” of the market are “very very good”, but that speculative sections of the market are overpriced. And he talks about why he thinks day-to-day economic headlines are distracting and irrelevant to good investing.