iQ US MEGA CAP 10 MODEL
Focused U.S. mega-cap leaders
Rules-based multi-factor discipline
Equal-weighted 10-stock portfolio
More balanced sector diversification
Seasonal, off-cycle rebalancing
Higher historical return, lower Ulcer Index*
*Past performance does not guarantee future returns.
INVESTMENT OBJECTIVE
The iQUANT U.S. Mega Cap 10 Model seeks capital growth by investing in a focused list of America’s largest, most financially powerful companies. The model aims to outperform traditional cap-weighted large-cap indexes over a full market cycle while maintaining disciplined risk controls, smaller historical drawdowns, and a lower Ulcer Index than the S&P 500.
PROCESS
The iQUANT U.S. Mega Cap 10 Model uses a fully rules-based screen-of-screens process:
Start with the U.S. mega-cap universe
Select the top 90 U.S. companies by market capitalization, common stocks only, listed in the United States.Screen for balance sheet strength and earnings trend
Rank stocks on internal cash strength and a 9-month moving average of Earnings Turnover (ETO), which measures how effectively a business turns its operations into earnings.Screen for efficiency, stability, and sponsorship
Re-rank the mega caps on an ETO-based efficiency composite that penalizes high price volatility and weak sales efficiency, while favoring names with strong natural institutional ownership.Screen for profitability and pricing power
From the remaining names, focus on companies with top-tier gross profit margins, signaling durable pricing power and business quality.Apply the screen-of-screens scoring
Across all three screens, stocks are ranked and scored (1, e, e², …). Scores are added together and the top 10 names are selected and equally weighted (about 10% each).
The model is reconstituted and rebalanced seasonally—February, May, August, and November—intentionally one month off standard quarter-end dates. This avoids much of the quarter-end noise, index reshuffles, and “window dressing” activity, letting the fundamentals and Earnings Turnover signals drive the changes instead of calendar theatrics.
Why invest in a focused U.S. mega-cap model?
1. Own the real backbone of U.S. equity markets—on purpose, not by default.
Mega-cap companies build the networks, logistics, health systems, and platforms that carry the U.S. economy. Most investors reach them through a cap-weighted index and stop there. This model starts from the same universe but insists on balance sheet strength, earnings efficiency, and margin durability before a stock earns its place.
2. Address the concentration problem instead of ignoring it.
Today’s S&P 500 is dominated by a short list of names. That may be acceptable for “CYA,” but it is not much of a plan for ROA. The iQUANT U.S. Mega Cap 10 Model embraces concentration with intent: 10 equal-weighted positions chosen for quality, Earnings Turnover, and pricing power, not just for size. Historically, that discipline has produced higher returns, better downside capture, and a lower Ulcer Index than the broad index.
3. Pair rules, risk, and differentiation.
Advisors are under pressure to stand apart from the pack while still honoring fiduciary duty. A transparent, rules-driven mega-cap process helps on both fronts. The rules never change, emotions never enter the buy/sell decision, and the model’s 10-stock concentration can be tempered by combining it with other low-correlated models to lift the overall security count and diversify factor exposure. In short: you still “own America,” but you do it with a clearer discipline and a sharper edge.
Investing in U.S. mega-cap stocks involves equity market risk, including the possible loss of principal. Mega caps can be highly concentrated in a small number of companies and sectors, so setbacks in a few dominant names or industries may materially impact results. These stocks may also trade at higher valuations and be sensitive to global, regulatory, and technology shocks. Past performance of mega-cap stocks or any strategy investing in them does not guarantee future results.