Morgan Stanley Fixed-Quantitative Equity Research Quant Matters – Who Does Not L...-109178338

M Global IdeaQuantitative Equity ResearchQuant Matters – Who Does Not Like Quality?Investors have become more selective in Quality exposure in the current late cycle disinflationary environment. Growth with Quality overlay remains desirable. We list five reasons why we believe Quality overlay remains important from macro, profitability, hedging, and fundamental perspectives. M Morgan Stanley & Co. International plc+Ronald Ho, CFAQuantitative Analyst Ronald.Ho@morganstanley.com +44 20 7425-2722 Morgan Stanley India Company Private Limited+Aparna T R, CFAQuantitative Strategist Aparna.T.R@morganstanley.com +91 22 6514-3447 Morgan Stanley & Co. International plc+Stephan M KesslerQuantitative Analyst Stephan.Kessler@morganstanley.com +44 20 7425-2854 Stephan HellerQuantitative Analyst Stephan.Heller@morganstanley.com +44 20 7425-9753 Exhibit 1 : 4 Dimensions Factor UpdateBest to worst ranking, 1 = BestEuropeUS45719111381512102616141733572101311915148161612174161116Current ValueDeep ValueDefensive ValueComp. ValueGrowthComp. GrowthMomentumRevisionsComp. momentumEarnings QualityLeverage*Management QualityOperating QualityProfitabilityComp. QualityRisk (Low Vol)Size*VALUEMOMENTUM GROWTHQUALITYRISKSIZECurrentMay74152812116141013351691714614389127151113251610171161116 Source: FactSet, Morgan Stanley Research. The composite rank is derived from the average ranking of the 4 DIMENSIONS Framework by subgroup to select the most and least favoured categories at the time. *Indicates lower values are preferred. Recent notable research: Quantitative Equity Research: Quant Matters – US Europe Mid-Year Outlook: Grow(th) in Prudence (17 Jun 2024) The 4 Dimensions Update (framework in this report) & Factor Views: Europe – Up vs Down EPS Revisions (3ma) (+), Net Buyback Yield (+), FCF Yield (+). Ranking of factor subgroups in June is close to May. Value and Size (Small) factors continue to rank well. Within Quality, Management Quality remains favoured, while Profitability and Earnings Quality are rather weak. Momentum and Growth groups rank weak across subgroups.US – Internal Growth (+), Low PEG (+), Profitability (+). Ranking in June is mostly similar to May. Value and Size (Small) factors remain top ranked. Within Quality, Management Quality and Operating Quality are more favoured by the framework, while Profitability and Low Leverage are less favoured. Momentum and Growth groups rank weaker than other factor groups.Factor performance in June: Comp. Value reversed the outperformance in May and was down 3%/4% in Europe/US. Comp. Growth was up by 2% in Europe, and ended flat in the US. Comp. Momentum gained 3%/2% in Europe/US. Comp. Quality appears to have bottomed out, up by 2%/1% in Europe/US. Low Vol up 4% in Europe, but ended flat in the US. Size (Small) down by 2%/3% in Europe/US.QuantWise highlights research that incorporates a robust quantitative approach in our investment analysis.Morgan Stanley does and seeks to do business with c