Core Insights - The article discusses a stock selection strategy that aims to generate alpha, defined as risk-adjusted outperformance, by consistently identifying stocks with lower valuations and better growth potential [3][4]. Selection Strategy - The strategy involves selecting the top 10 best bets from each sector on a quarterly basis, which has historically generated an annualized return of 11%, with an alpha of 1.9% and a Sharpe ratio of 0.52 [4]. - The selection process includes evaluating stocks based on P/E and P/EBIT ratios for valuation, revenue growth over the last quarter, the last 12 months, and the average across the last 3 years, as well as the last 3 years' average free cash flow margin [5]. Performance Metrics - A backtest covering nearly a decade indicates that holding these selected stocks for at least a quarter can outperform the sector index XLV [6]. - The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has shown significant outperformance compared to benchmarks like the S&P 500, S&P mid-cap, and Russell 2000 indices, delivering superior returns with lower risk [6].