Price & Market BehaviorCore researchInvalid

Quality Minus Junk

Updated quarterlyData needs: medium

2019

Asness, C.S., Frazzini, A., Pedersen, L.H. (2019). "Quality Minus Junk." Review of Accounting Studies, 24, 34-112. (Loose single-name proxy; see mechanism.)

Read the paper →

In plain terms

Stocks whose gross profitability is improving versus their own past year AND that are trending up over 12 months get a long position; otherwise hold cash. A simplified single-stock take on the Quality Minus Junk idea; the full 4-factor composite is the quality_minus_junk family.

How it works

Single-name proxy loosely after AFP 2019 QMJ, NOT the paper's construction. Uses one profitability metric only: gross_profit / total_assets (Novy-Marx GP/A); no ROE, growth, or safety legs (the 4-factor composite is family #383 quality_minus_junk). GP/A is ranked against the stock's own trailing 252-day history of daily-ffilled quarterly values, so the signal captures quality improvement vs the past year rather than cross-sectional quality level; the long bucket is the top TERCILE (rank >= 0.66), not a decile/quintile sort. A 12m absolute-momentum overlay (close > close 252d ago), which is not part of QMJ, is combined via AND or weighted average, and the strategy trades long/cash only (no short junk leg). Fundamentals are available-date lagged 45d to respect filing latency; the rolling rank is strictly backward-looking.

Live results

1 times picked on its own · 5 times inside a blend (3 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 5 such blended picks (3 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Loading substrate evidence…

Data dependencies

Fundamentals quarterly
Quarterly fundamentals (income, balance, cash-flow) from FMP + SEC.
Daily bars
Daily OHLCV bars used by all price-based generators.

Expected edge

Reported Sharpe: 0.6-0.9 (AFP 2019, on the paper's cross-sectional L/S composite; not this proxy's construction)
Tested over: 1956-2016

Paper reports 0.6-0.9 Sharpe on its cross-sectional long-short decile composite (1957-2016, global); that figure does not map to this single-metric long/cash time-series proxy.

Example tickers where this is likely to fire

MSFT V MA

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

Betting Against BetaPrice & Market Behavior

Low-beta stocks (calmer than the market) tend to deliver better risk-adjusted returns than high-beta ones; this family overweights when beta drops.

Gross ProfitabilityPrice & Market Behavior

Companies with high gross profit / total assets keep beating peers — it's the cleanest measure of 'is this business actually good'.

Explore Quality Minus Junk on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

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