“Quality” stocks with strong fundamentals tend to be rewarding places to stash hard-earned money. Since 2009, investing in a basket of quality stocks over a standard index has been a strong divergence. Analysis from T. Rowe Price shows that the quality-focused MSCI All-Country World Index (ACWI) significantly outperformed the standard ACWI.
However, just because a stock has a quality company behind it doesn’t mean it will be a great investment. Reactions to new information can damper a company’s value, especially in the short term. However, this can also create an opportunity to invest in a quality company at a good price.
Quality doesn’t have a strict definition when it comes to stocks. However, quality fundamentals include high-profit margins, low debt levels, and strong return on equity (ROE). Additionally, being in an industry with rising long-term demand is a big positive.
Below, I’ll detail three stocks that investors have beaten down by 20% or more in 2025 but still have strong quality characteristics. All return figures and other metrics use data as of March. 3 close unless otherwise stated.
1. TTD: Down Over 40% With Strengths Across the Board
Trade Desk (NASDAQ:TTD) was a hot stock in 2024, rising over 63%. However, the stock has gotten crushed to start 2025, down a staggering 43%. Shares got obliterated after the company’s recent earnings report. Revenue growth and revenue guidance were weak, and the company missed its internal expectations for the first time in 33 quarters. Still, this company has many strong characteristics despite its recent crash. The company maintained a strong operating margin of over 17% for the full year 2024, and analysts expect this figure to remain stable in 2025.
Forecasters expect revenue growth to drop significantly next year but will still grow at a solid 18% clip. Analysts see the figure accelerating back to 20% in the following years and that earnings will grow 32% by 2026. Additionally, the company has excess cash of $1.6 billion after subtracting its total debt. Trade Desk is in two large and growing markets: advertising technology and connected TV. Despite recent hiccups, the Trade Desk remains in a strong long-term position.
2. ANET: Data Center Supplier With Big-Time ROE
Arista Networks (NYSE:ANET) is a technology firm that is down 22% in 2025 but still has quality fundamentals. The company has an impressive adjusted operating margin of 47%. By 2025, analysts predict Arista will have an adjusted operating margin of 44%. This is more than 1,000 basis points above estimates for Cisco Systems (NASDAQ:CSCO), one of its major competitors. Analysts forecast revenue to keep growing at a solid rate of 20%, while they project earnings to increase around 59% by 2027.
Arista’s cash exceeds its debt by over $8 billion, giving it the ability to engage in significant mergers and acquisitions (M&A) if it chooses. Additionally, the firm sits in another market that most agree is only poised to grow: data centers. This company offers equipment that directs traffic in data centers.
It ensures information reaches its destination quickly and efficiently. The firm also boasts an incredibly high ROE of 33% over the past 12 months, which, according to Koyfin data, is higher than 95% of global technology stocks.
3. STZ: Buffet’s Billion-Dollar Bet on Beer
Constellation Brands (NYSE:STZ) is a significantly different company from the other two, but still has undeniable strengths. The company owns the world’s most popular Mexican beers, including Corona, Modelo, and Pacifico. Shares are down nearly 21%. Shares dropped over 15% after the firm’s latest financial release, where it missed on both earnings and revenue.
Constellation had a strong adjusted operating margin of nearly 33% in 2024. Analysts expect this figure to rise by around 200 basis points in 2026. Revenue growth expectations are in the 2% to 5% range annually over the coming years, and earnings are forecast to grow 66% by 2027.
Overall, investors know the beer industry for its steady growth and resilience in bad economic times. Over the past 10 years, Constellation hasn’t seen negative full-year revenue growth a single time. Tariffs on Mexico are a risk for this firm, but Warren Buffett is one investor who is notably bullish. Berkshire Hathaway (NYSE:BRKa) purchased an over $1 billion stake in the firm in Q4. However, given recent developments, seeing if that position gets bigger or smaller after Q1 will be interesting.