How to Build a Market-Beating Portfolio
Why quality-driven value investing is a straightforward, potentially alpha-achieving investment strategy in an overly complex financial services industry.
Informed investors recognize they are more likely to accumulate stock market wealth slowly rather than quickly.
Quality Value Investing (QVI) provides investment principles and portfolio strategies to assist retail investors in identifying high-quality, primarily dividend-paying common stocks offered at attractive prices. Thus, QVI’s mission is to leverage the benefits of total return compounding.
Fortunately and humbly, our family’s total return portfolio has achieved this outcome through multiple market cycles and counting.
As a private investor and author, I strive to share my knowledge while uncovering what I don’t yet know. Since my crystal ball broke years ago, I have committed to practicing honest and prudent current wealth and present value investing in a world of unreliable predictive analysis. This strategy has created asymmetric quality at value investment opportunities.
Quality-driven value investors can outperform the market over time by employing rational thought, discipline, and patience. They adhere to a well-defined set of established principles and strategies. For instance, QVI’s Founding Premium+ and Premium subscribers, mainly retail investors, invest alongside me—figuratively speaking—toward our shared goal of achieving stock market alpha with lower costs and reduced risks.
I have persevered and profited despite navigating some of the most turbulent markets in recent history: the dot-com collapse of the early 2000s, the financial crisis of 2007–08, the epic bull market era of 2009-19 following the Great Recession, the volatility-driven fluctuations during the COVID-19 pandemic of 2020-21, and the inflation-induced bear market of 2022.
How to Build a Market-Beating Portfolio
This post unveils how to profit from proven, market-beating principles and strategies derived from actively managed real-time and model stock portfolios constructed with concentrated or diversified blends of total-return common shares of high-quality, enduring enterprises.
Premium members of Quality Value Investing enjoy exclusive access to the alpha-generating QVI Stock Picks, presented in user-friendly spreadsheets updated in real-time.
The baskets include initial and updated research reports with full-text access. The supporting research reports provide details on the company profile, value proposition, management returns, shareholder yields, valuation multiples, and potential downside risks associated with the enterprises and their share prices.
The QVI Real-Time Stock Picks encompass common shares from high-conviction, predominantly dividend-paying quality companies. A few picks occasionally trade at value prices and thus earn buy ratings. Additionally, the proprietary real-time performance trackers highlight the overall performance of each common stock holding against the S&P 500 benchmark, an index of the largest publicly traded companies available on major U.S. stock exchanges.
Quality Value Investing’s Track Record
After committing to quality-driven, value-based common stock investing over 16 years ago, the shares of the 40 publicly traded companies covered by Quality Value Investing and showcasing in the QVI Real-Time Stock Picks, including the nine stock picks owned in our family portfolio, have outperformed the S&P 500 Index by +10,861 basis points (bps). This outcome is equivalent to an average of +108.61 percentage points per holding based on the performance of each holding since its inception in August 2010, as of the market close on January 24, 2025.
When including the 19 stocks from the QVI Former Picks—Good Ideas at the Time no longer covered by QVI but remain active for monitoring and newsletter transparency for subscribers—it leads to a cumulative total of 59 current and former holdings that still outperform the market by +3,043 basis points (bps), equivalent to an average of +30.43 percentage points per holding since inception in July 2008. Remember that this combined result assumes QVI was still covering the 19 former picks as of the market close on January 24, 2025.1
Quality Value Investing underscores market-beating potential over a long-term holding period rather than next week, next month, or a year from now. Following the market freefalls of the Great Recession and the inflationary bear market—combined with the seesawing from the coronavirus pandemic in between—the performance of the QVI Stock Picks affirmed the benefits of a farsighted investment paradigm.
For example, as of the market close on January 24, 2025, the stocks held for fewer than five years in the currently covered QVI Real-Time Stock Picks outperformed the S&P 500 in total return by an average of +776 bps per holding or +7.76 percentage points each. In contrast, those held for over five years outperformed the benchmark by a significant average of +29,590 bps per holding or +295.90 percentage points each.
Investors who give up on underperforming stocks held fewer than five years forego the potential for a sizable market outperformance from total return compounding. The QVI Real-Time Stock Picks have demonstrated the time-tested investment platform of buy-and-hold, quality-driven value investing is alive, well, and forever.
This Post is Less a Victory Lap
My disclosure of QVI’s total return performance compared to its S&P 500 benchmark results is not intended as a victory lap but more of a discourse on how retail investors can achieve alpha without the financial services industry’s penchant for unreliable predictive analysis and dizzying business modeling overkill, which generates fees more than alpha.
As widely reported in financial media, no more than 20-25% of professionally managed portfolios consistently outperform the market. Nevertheless, when Wall Streeters are asked for their perspective on the purported industry-wide poor results, they often disagree and claim, “It’s more like 10%.”
So, if well-intentioned skeptics mistrust the Wall Street Way but are still skeptical of QVI’s “just the facts: current wealth and present value strategy” despite its 16+ years of documented results, that is okay. Indexing may be their best route as long as they are comfortable with the funds automatically holding poor-quality stocks along with quality ones in the basket and understand that index funds are guaranteed to go as far down as the target market as they go up.
Methodology
For a more balanced view of each holding’s performance, the QVI Real-Time Stock Picks are equal-weighted against the S&P 500 Index based on the dates of our initial stock purchase or the original publication of the research. Total return represents the share price performance adjusted for splits and dividends. Remember that past performance is uncorrelated to future returns.
The holdings of the QVI Stock Picks showcased in this newsletter serve as a metaphor for building low-cost, lesser-risk, and perhaps market-beating portfolios despite any limits of available investment capital. The stock picks are supported by daily, real-time performance trackers, plus initial and updated research reports of each holding based on QVI’s proprietary current wealth and present value system. The spreadsheet models allow premium subscribers to monitor primary ticker performances for new ideas, upgraded opportunities, and downgrades of good ideas at one time.
The Vision Behind the QVI Stock Picks
Every venture, including self-managed investment portfolios, should have a vision statement. Here is the concept that drives the QVI Stock Picks:
A long-term checklist-driven investment strategy of researching and purchasing the shares of predominantly dividend-paying, high-quality companies at fair prices and holding those shares for as long as each business continues to excel and endure, perhaps indefinitely.
I advocate investing in great companies producing in-demand and profitable products or services that assist consumers worldwide in solving personal and business problems, wants, or needs. As a result, alpha-achieving common stock portfolios resemble collections of owned slices of enduring enterprises with durable competitive advantages.
Regarding trading stocks, retail investors inclined to gamble can drop by the local casino with discretionary dollars and, whether winning or losing, have a good time. However, disciplined investors never place bets on investment tips or perceived opportunities for quick, wishful—albeit unlikely—gains.
As an accompaniment to the principles, strategies, and practices discussed throughout the Quality Value Investing newsletter, new readers and free subscribers are encouraged to access the QVI Real-Time Stock Picks by upgrading to a high-value, low-cost premium subscription.
Thanks for reading Quality Value Investing on Substack. I hope you enjoy and benefit from the newsletter as much as I enjoy sharing the exhilarating experience of implementing the current wealth and present value principles and strategies in our quest for total return investment alpha over an extended holding period.
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About the Writer
David J. Waldron is the contributing editor of Quality Value Investing and author of the international-selling book Build Wealth with Common Stocks: Market-Beating Strategies for the Individual Investor. David’s mission is to inspire the achievement of his readers’ financial goals and dreams. His work has been featured on Substack Finance, Seeking Alpha, MSN Money, TalkMarkets, ValueWalk, Yahoo Finance, QAV—Australia’s #1 Value Investing Podcast, Money Life with Chuck Jaffe, LifeBlood with George Grombacher, The Acquirer’s Multiple, Capital Employed, Amazon, Barnes & Noble, Apple Books, the BookLife Prize, and Publisher’s Weekly. David previously enjoyed a 25-year career as a postsecondary education executive. He received a Bachelor of Science in Business Studies as a Garden State Scholar at Stockton University and completed The Practice of Management Program at Brown University.
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Disclosure: As of this writing, our total return family portfolio has long and beneficial positions in the common shares of all nine stocks in the QVI Concentrated Portfolio. I wrote this post myself to express my opinions. I am not receiving compensation for it other than through Substack’s paid subscriptions. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Quality Value Investing (QVI) is an investment research newsletter for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond the QVI Real-Time Stock Picks, which are presented solely for educational purposes. David J. Waldron is an individual investor and author, not an investment advisor. Subscribers should always engage in their independent research or due diligence and consider consulting a fee-only certified financial planner, a licensed discount broker/dealer, a flat-fee registered investment advisor, a certified public accountant, or a specialized attorney before making any investment, income tax, or estate planning decisions.
Disclaimer: Although Quality Value Investing takes a skeptical view of the financial services industry, commonly known in the media as Wall Street—a euphemism for professional or institutional investing globally—it does not imply nor express specific issues or negative references regarding any actual organizations or individuals working within the financial services sector. Any perceived connection or offense to actual firms or individuals is coincidental and unintentional. In its general critique of the universal Wall Street business model, QVI avoids unproven conspiracy theories and offers a platform for commentary, critique, education, and parody. In this context, facts stand apart from any alternative perspectives. Therefore, the subjective thoughts shared by the author throughout the post are his opinions and should not be considered facts.
The cumulative performance of QVI Real-Time Stock Picks is calculated as an equal-weighted average for each holding compared to the S&P 500, starting from the date Quality Value Investing first covered each pick. The total return calculation includes the original cost basis adjusted for stock splits, if any, and dividends paid in cash.