Beyond price: Understanding quality investing : understanding private investor perception of quality investing through semi-structured interviews

Abstract

Quality investing has gained popularity as an investment approach during recent years. Quality investing lacks a commonly agreed on definition and thus it could be of interest to understand how private investors perceive the metrics related to quality investing. Earlier research has established that profitability, capital allocation and competitive advantages have a positive impact on the quality of a company. This thesis used semi-structured interviews as a research method to answer the following research questions 1) Does private investor perception of quality companies align with research on sustainable competitive advantages? 2) Does private investor perception of quality companies align with research on capital allocation and management? 3) Does private investor perception of quality companies align with research on return on capital?. Through semi-structured interviews, it was possible to gain data on how private investors perceived the metrics that attributed to quality. The interview answers were analyzed through contextual analysis to gain a rich understanding of the answers. By comparing the answers to presented research on capital allocation, return on capital and competitive advantage the research questions could be answered. The results indicated that private investors’ perception of quality metrics didn´t align or align modestly with presented research. This indicates that private investors might not be aware of the metrics that contribute to a company´s quality. The results also implied that private investors had a varying definition for what quality is. Due to the limited size of the sample, the results should not be generalized, and further research is recommended.