M Global IdeaQuantitative Equity ResearchQuant Matters – Capturing Mid Cap Opportunities With CautionIntense market concentration has led to growing attention on spaces beyond large caps. Mid caps tend to outperform large caps as inflation stabilises and rate cuts start. Value and Quality are the top performing styles in mid caps, from which we construct a Mid Cap Composite long only factor. 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 Exhibit 1 : 4 Dimensions Factor Update Best to worst ranking, 1 = BestEuropeUS81671512359101342611114171115121310865114347921617161116Current ValueDeep ValueDefensive ValueComp. ValueGrowthComp. GrowthMomentumRevisionsComp. momentumEarnings QualityLeverage*Management QualityOperating QualityProfitabilityComp. QualityRisk (Low Vol)Size*VALUEGROWTHMOMENTUMQUALITYRISKSIZECurrentDecember10713498161215116351411721061479111581612245133171161116 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. QuantWise highlights research that incorporates a robust quantitative approach in our investment analysis. The 4 Dimensions Update (framework in this report) & Factor Views: Europe – Net Buyback Yield (+), Total Yield (+), FCF Yield (+). The rankings of factor subgroups in January moved in comparison to December. Composite Momentum factor ranking fell to 10 (from 1 in December). On the other hand, Defensive Value and Composite Growth rankings improved. Quality rankings remain similar to last month. US – Net Buyback Yield (+), Profitability (+), Low PEG (+). In the US, rankings in January are fairly similar to December with a few exceptions. Composite Value and Growth rankings improved. Leverage and Revisions rankings dropped. Composite Quality is now ranked best in the framework. Low Vol, Momentum and Growth factors continue to rank low. Factor performance in January: In January, factor performances were mixed with Composite Momentum, Growth and Low Volatility factors gaining while Size (Small) underperformed. Low Vol gained back some of its December loss by moving up by 6% in Europe (3% in the US). Composite Momentum and Growth gained 5% each in Europe (7% and 3% respectively in the US). Size (Small) fell -4% in each region while Value and Quality were close to flat or gaining close to 1%. Total Yield climbed 2% in Europe and 1% in the US.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a res...
