Ask 10 asset managers how they would define quality and you would get 10 different definitions. Some believe it is the most misused term in investing.

Still, after equities suffered a sharp correction in the fourth quarter and rising corporate debt levels suddenly became a headline market concern, the quality factor is dominating investment conversations. “If we are going into a slowdown, the quality of balance sheets and the durability of earnings should float to the top,” says Mark Balasa, co-founder and chief investment officer at Balasa Dinverno & Foltz in Chicago.

Some sophisticated investors today are favoring the more granular lens of factor investing as providing more information than simplistic style-box analysis. Factors such as momentum, value, size, yield and quality increasingly are viewed as vehicles to construct more effective portfolios. Quality can be traced back to Benjamin Graham, but in today’s investment universe, there are two primary definitions of quality, according to Balasa. One developed by the University of Rochester’s Robert Novy-Marx simply takes free cash flow and divides it by total assets. The second, initially developed by Barra, combines return on equity, debt-to-equity ratios and earnings variability to create a metric. Today, many asset management firms have developed their own proprietary methodology to assign quality scores to individual stocks.

On its website, MSCI says that between 2002 and 2015, stocks with favorable quality readings “persistently outperformed” those with poorer scores. It adds that this performance gap was particularly pronounced during the 2008-2009 financial crisis and the subsequent recovery. Extensive research by quants at Northern Trust Asset Management supports this conclusion.

There are other reasons that quality is garnering so much airtime as 2019 begins. Until the fourth quarter correction began, many “low-quality names were priced for perfection” and got hammered, according to Mike Hunstad, head of quantitative research at Northern Trust Asset Management. Then as the correction accelerated toward bear-market territory in December, investors became scared and fled to high-quality companies.

Many managers try to go well beyond simply applying a group of financial yardsticks to screen for strong companies with predictable returns. Rajiv Jain, chairman and chief investment officer of GQG Partners, believes that it is imperative to embrace a “forward-looking” approach in the age of disruption.

Many businesses that once belonged to the quality universe no longer do. In the second half of the 20th century, companies like Philip Morris (now Altria) and Anheuser-Busch would have been poster children for the asset class, generating high levels of predictable earnings that were impervious to multiple recessions. But declining unit sales eventually overwhelmed Philip Morris’s huge profit margins and craft beers cut into Budweiser’s dominance.

Consumer staples businesses like PepsiCo and Coca-Cola are considered a key part of this asset class, but today’s market is weeding out many companies as millennial consumption preferences change. “Quality means downside protection,” Jain observes.

Jain adds that when one takes a backward-looking approach to quality, the benefits can quickly “be arbitraged away.” An increasingly democratized economy is making companies that were once impregnable suddenly vulnerable.

Until a few years ago, General Mills had a strong moat around most of its business lines, including Yoplait Yogurt. Small yogurt companies couldn’t afford national advertising budgets. Today, Jain notes, they can advertise on Facebook.

Disney is another company many people think is poised for several strong years of good results following its acquisition of Fox. Jain isn’t so sure. Certain segments of its business, like broadcasting and cable networks, are no longer growing. Its movie studio business enjoyed a banner year, but it is notoriously mercurial.

The other big worry, in Jain’s view, is what could happen to its giant theme park operations in an economic slowdown. If they keep raising prices at Disney parks, the cost to many young families of four becomes almost prohibitive, he believes.

Finally, there is another issue. No acquirer on the media landscape has been more successful over the last four decades than Rupert Murdoch. Disney investors might want to ask themselves, “Why is Rupert Murdoch selling?” Jain says.

But it is also possible for companies that have fallen out of the quality universe to regain their luster. Microsoft is one prominent example.

Procter & Gamble is another. For years, many considered the Cincinnati-based consumer products giant a victim of the law of large numbers. Most of its product lines like Crest and Ivory soap move in lockstep with GDP and also are subject to pricing pressure. Jain’s team at GQG discovered last year that the company overhauled its incentive package for its sprawling sales force. Lo and behold, sales surprised to the upside, and P&G turned into a winner last year.

Many technology companies populate the low-quality universe. While Hunstad won’t name names, he believes that their lack of profitability will come back to haunt many of these concerns as they revert to their mean. In a number of cases, it is happening already.

Hunstad sees the utility sector as one where earnings stability, the search for income and the perception of quality have caused excessive valuation. Now many utilities’ shares are “far too high to justify,” he says.

Hunstad himself has written extensively on quality investing and worries about some of the misconceptions in the marketplace. “Many firms just look at a return on equity. That’s not enough,” he argues.

A metric like return on assets may be very relevant for analyzing industrial companies and of little use when looking at financials, he explains. His portfolios focus on three themes: a target company’s profitability, its cash flow and its efficient use of capital.

But Northern Trust assigns quality scores to stocks based on an array of measures, including a company’s ability to convert assets into sales and earnings and its ability to convert equity and invested capital into returns. Other dimensions include a company’s solvency and its ability to self-fund growth without overextending itself. “We don’t want to see balance sheets that are out of whack” or companies that are overly aggressive in capital spending and M&A.

Again, Hunstad won’t name names, but contrast the performance of a serial acquirer like AT&T that has racked up $180 billion in debt with a disciplined rival like Verizon that makes only strategic acquisitions and then pays down debt. Verizon is expected to be in a far better position when 5G is rolled out over the next five years. In the popular FANG universe, it’s clear a highflier like Netflix that must access the credit markets on a continual basis wouldn’t meet the self-funding test.

When it comes to constructing quality portfolios, two quality funds can look very different. BlackRock prefers to design factor portfolios that tend to be sector-neutral, according to Sara Shores, head of investment strategy for the firm’s factor-based strategy group. “Otherwise, you would end up with portfolios overweighted to health care and consumer staples,” she says.

Shores notes that fundamental accounting measures vary across industries and portfolios need to adjust for this. She adds that cash earnings are a more illuminating measure than accrued earnings, which can be manipulated more easily.

BlackRock also tries to ascertain where “we are in the economic regime,” Shores continues. “Our research suggests we are slowing. That kind of environment tends to favor quality. Investors are feeling fragile and looking for defensive strategies. Value tends to do well when growth is accelerating.”

Shores likes to see companies that are growing profits by investing in organic growth rather than making acquisitions.

Other quality funds favor high concentration. The GMO Quality Fund held 45% of its assets in technology stocks on November 30, according to a note its manager, Tom Hancock, sent to clients. He maintained that “a technology-heavy portfolio can still be defensive if it is comprised of the right companies that meet our quality standards and trade at reasonable valuations.”

Many advisors who follow GMO’s seven-year asset class forecasts might be surprised to learn that its “carefully constructed subset of 40 stocks” has a far better outlook than the U.S. market as a whole. Hancock says “a 5% real return for high quality stocks” is achievable for the next seven years, as he expects profit margins to be sustainable, with no multiple compression. Some of the top holdings in his high-conviction portfolio were Alphabet, Apple, Microsoft and Oracle. It also owns industrials like Honeywell, 3M and United Technologies.

It’s hard not to observe how many quality strategies hold asset-light, high-quality companies like Alphabet and Microsoft. Although Jensen Quality Growth also holds these companies, Allen Bond, the fund’s manager, notes his fund also holds United Technologies, a very capital-intensive business. “We’re a growth manager, but valuation discipline is critical,” Bond contends.

Individual securities can possess characteristics belonging to multiple factors. For example, Leah Bennett, president of Westwood Trust Co., cites Public Storage as a quality value stock. With a dividend approaching 4% and its facilities filled at nearly 98% capacity, one could call it quality, value or both.

Since the 2016 election, growth stocks have outperformed value by nearly three times. Quality growth stocks have their place, but Bennett believes a reversal could be near.