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  "description": "Earlier this month, we announced that we would begin publishing the performance of our coverage portfolio.\n\nThe decision reflects a simple principle: research should be measurable. While equity research is ultimately judged by the quality of its analysis, investment recommendations should also be evaluated based on whether they generate value for investors on a risk-adjusted basis over time.\n\nPublishing performance serves two purposes:\n\n 1. First, it provides a transparent framework for assessin",
  "path": "/qs-index-performance-update-may-2026/",
  "publishedAt": "2026-05-30T18:56:09.000Z",
  "site": "https://quartz-sea.com",
  "tags": [
    "here",
    "https:/quartz-sea.com/qs-index-methodology/",
    "https://quartz-sea.com/terms-conditions/"
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  "textContent": "Earlier this month, we announced that we would begin publishing the performance of our coverage portfolio.\n\n**The decision reflects a simple principle: research should be measurable.** While equity research is ultimately judged by the quality of its analysis, investment recommendations should also be evaluated based on whether they generate value for investors on a risk-adjusted basis over time.\n\nPublishing performance serves two purposes:\n\n  1. First, it provides a transparent framework for assessing the effectiveness of our ratings, price targets, and overall research process.\n  2. Second, it creates accountability. By making results publicly available, we allow readers to independently evaluate whether our work is delivering on its objectives.\n\n\n\nThis is particularly important given the nature of our client base, which allocates capital based on evidence, process, and track record.\n\nWhat initially appeared to be a straightforward exercise, however, proved more complex in practice.\n\nIndeed, translating a research coverage universe into a representative and objective performance benchmark requires a number of methodological decisions regarding position sizing, rating implementation, portfolio construction, and rebalancing. Ensuring that the resulting framework accurately reflects the intent of our recommendations while remaining objective and transparent was a more demanding task than we originally anticipated.\n\nThe methodology we ultimately adopted is outlined below, together with the portfolio's performance for the month.\n\n# Performance\n\nIn May 2026, the QS Index returned 5.13%, underperforming its benchmark by 58bps. Since inception, the QS Index has returned (0.98%), lagging the benchmark by 557bps.\n\nFig. 1 - QS Index Performance Summary\n\nThe relative underperformance can largely be attributed to three factors:\n\n  1. First, the portfolio remains highly concentrated, reflecting the fact that our coverage universe currently consists of only five companies. While our rating framework influences position sizing and concentration, the limited number of covered names inherently constrains diversification and results in a portfolio that is significantly more concentrated than the benchmark.\n  2. Second, timing has been unfavorable. Shortly after the launch of our coverage, European defense equities experienced a broad sector-wide pullback. Given the portfolio's concentrated nature, this market dynamic had a disproportionate impact on relative performance.\n  3. Third, our research process is not designed to generate short-term trading signals. We believe the most appropriate measure of our recommendations is their medium-term performance, particularly over a six-month forward horizon. Therefore, individual recommendations should be assessed over the life of the investment thesis rather than on short-term market movements: while positive performance may materialize sooner, our research is intended primarily for investors and institutional allocators rather than short-term traders, and should therefore be evaluated accordingly.\n\nFig. 2 - QS Performance as of May 30th, 2026. You can always find the up-to-date performance here.\n\nNotwithstanding these considerations, we view a MTD underperformance of just 58bps as a resilient outcome given the portfolio's concentration and the sector headwinds experienced during the period. While the observation period remains limited, the result is broadly consistent with our expectations and provides an encouraging early indication of our stock selection and valuation process.\n\n# Methodology\n\nThe coverage portfolio is designed to provide a transparent and objective framework for evaluating the performance of our research recommendations over time.\n\nPortfolio construction and performance attribution are entirely rules-based and computed algorithmically: once research inputs are published (including ratings, valuation targets, and risk assessments), the portfolio is adjusted according to a predefined methodology without discretionary intervention. This ensures that performance results are consistent, replicable, and free from hindsight bias, while providing readers with a transparent measure of the effectiveness of our research process.\n\nThe portfolio is constructed exclusively from companies under active coverage and is adjusted whenever a new rating, target price, or material revision is published. Position sizing is determined systematically using a combination of conviction level, expected upside, and company-specific risk considerations. As a result, recommendations with stronger return potential and more favorable risk characteristics generally receive larger portfolio allocations than lower-conviction opportunities.\n\nImportantly, the portfolio is not equally weighted.\n\n💡\n\nOur objective is to approximate how an investor implementing our research framework might allocate capital across our recommendations rather than simply measure the directional accuracy of individual ratings.\n\nTo ensure that performance reflects current research views, portfolio exposures evolve over time. Recommendations have the greatest influence on portfolio construction when first issued and gradually become less impactful as they age, unless reaffirmed or updated through subsequent research.\n\nPortfolio performance is calculated using daily market prices and is measured on a total return basis. Aggregate portfolio returns are then compared against relevant European equity benchmarks to assess both absolute and relative performance. Performance is reported across multiple time horizons, including month-to-date, quarter-to-date, year-to-date, and since inception.\n\n**The coverage portfolio should _not_ be interpreted as a model portfolio, investment strategy, or investable product.**\n\nIt is a performance measurement framework designed to evaluate the effectiveness of our research recommendations. Accordingly, reported returns do not account for transaction costs, market impact, liquidity constraints, taxes, financing costs, or other implementation considerations that may affect realized investor outcomes. Actual portfolio results may therefore differ from the returns presented.\n\nThe primary purpose of the coverage portfolio is to provide an objective and transparent assessment of whether our ratings, valuation work, and security selection process have generated value relative to the broader market over time.\n\nReaders interested in additional detail may consult the full QS Index methodology here: https:/quartz-sea.com/qs-index-methodology/\n\n# Disclaimer\n\nGiven the limited number of covered companies and the relatively short performance history available at this stage, conclusions regarding the effectiveness of the methodology should be considered preliminary. We expect the statistical significance of the track record to improve as the coverage universe expands and additional performance data becomes available.\n\nQuartzSea Research is an independent firm and is not a registered investment advisor. Investing involves risk. For our full Legal Disclaimer and Disclosure, please visit: https://quartz-sea.com/terms-conditions/",
  "title": "QS Index Performance Update - May 2026",
  "updatedAt": "2026-05-30T18:56:10.745Z"
}