Low Debt Quality Stocks: Switzerland (SIX) — 25-Year Backtest
Switzerland produced the best Sharpe ratio of any exchange tested in this series: 0.429. The CAGR excess over SPY is a modest +0.30%, but on a risk-adjusted basis, Switzerland is the standout. 8.14% CAGR, 17.79% annualized volatility, 69.27% down capture. Never in cash across 25 years.
Contents
- Method
- The Signal
- The Screen (SQL)
- What We Found
- Annual Returns (July to July)
- Risk-Adjusted: The Best Sharpe in the Series
- The Early Decade Lead (2000–2006)
- The Middle Decade Drag (2010–2013)
- Currency as a Natural Hedge
- Backtest Methodology
- Limitations
- Takeaway
- Part of a Series
- Run This Screen Yourself
This isn't an accident. Switzerland has structural alignment with the Low Debt Quality signal. The country's dominant industries, pharmaceuticals, food, luxury goods, precision manufacturing, operate with conservative balance sheets by culture and by competitive necessity. The D/E < 0.5 filter doesn't reshape Switzerland's universe as dramatically as it does for commodity-heavy markets. It finds the core of what the Swiss economy already is.
Method
- Universe: SIX Swiss Exchange stocks with market cap above CHF 500M, actively trading.
- Period: July 2000 to July 2025 (25 annual holding periods).
- Rebalance: Annual, each July. Equal weight across all qualifying stocks.
- Benchmark: S&P 500 Total Return (SPY), in USD. Portfolio returns in CHF.
- Cash rule: Hold cash if fewer than 10 stocks qualify. Switzerland had 0 cash periods, averaging 23 stocks per holding period.
- Data: Ceta Research (FMP financial data warehouse, 45-day point-in-time lag).
The Signal
Two filters define the portfolio.
D/E < 0.5 (Debt/Equity from annual financial statements). Swiss multinationals like Novartis, Nestlé, and Roche carry relatively low financial leverage compared to their international peers. The filter captures them cleanly. What it screens out: Swiss banks (UBS, Credit Suisse) where deposit leverage inflates D/E mechanically, and any industrial conglomerate with meaningful acquisition debt. The remaining universe is concentrated in healthcare, consumer staples, and specialty industrials.
Piotroski F-Score >= 7 (out of 9). The nine factors test for financial improvement across profitability, liquidity, and efficiency:
- F1: Net income > 0
- F2: Operating cash flow > 0
- F3: Return on assets improved year-over-year
- F4: Operating cash flow > net income (cash quality)
- F5: Long-term debt ratio decreased
- F6: Current ratio improved
- F7: No dilution (shares outstanding didn't increase)
- F8: Asset turnover improved
- F9: Gross margin improved
A score of 7+ means the business is healthy across most dimensions and improving. Combined with D/E < 0.5, it filters to companies that are both conservatively financed and operationally getting better.
Switzerland's 23-stock average across 25 invested years (0 cash periods) shows the filter is well-calibrated for this market. The universe is consistent: enough qualifying stocks every year to avoid cash, concentrated enough to produce a meaningful portfolio tilt.
The Screen (SQL)
Run this on current data to see today's qualifying Swiss stocks:
SELECT p.exchange, r.symbol, p.companyName, p.sector,
ROUND(r.debtToEquityRatioTTM, 3) AS de_ratio,
ROUND(k.returnOnEquityTTM * 100, 1) AS roe_pct,
ROUND(r.operatingProfitMarginTTM * 100, 1) AS opm_pct,
ROUND(r.interestCoverageRatioTTM, 1) AS interest_coverage,
ROUND(k.freeCashFlowYieldTTM * 100, 2) AS fcf_yield_pct,
ROUND(k.marketCap / 1e9, 2) AS mktcap_b
FROM financial_ratios_ttm r
JOIN key_metrics_ttm k ON r.symbol = k.symbol
JOIN profile p ON r.symbol = p.symbol
WHERE r.debtToEquityRatioTTM >= 0
AND r.debtToEquityRatioTTM < 0.50
AND k.returnOnEquityTTM > 0.08
AND r.operatingProfitMarginTTM > 0.08
AND r.interestCoverageRatioTTM > 5.0
AND p.isActivelyTrading = true
AND k.marketCap > 500000000
AND p.exchange IN ('SIX')
ORDER BY de_ratio ASC
LIMIT 30
What We Found
| Metric | Portfolio | SPY |
|---|---|---|
| CAGR | 8.14% | 7.83% |
| Total Return | 606.79% | 558.69% |
| Max Drawdown | -36.50% | -36.27% |
| Sharpe Ratio | 0.429 | — |
| Volatility | 17.79% | — |
| Down Capture | 69.27% | — |
| Up Capture | 95.32% | — |
| Win Rate | 48% | — |
| Cash Periods | 0/25 | — |
| Avg Stocks | 23 | — |
Annual Returns (July to July)
| Year | Portfolio (CHF) | SPY (USD) | Excess |
|---|---|---|---|
| 2000 | +10.9% | -14.8% | +25.7% |
| 2001 | -16.1% | -20.8% | +4.7% |
| 2002 | +9.6% | +3.3% | +6.3% |
| 2003 | +27.4% | +16.4% | +10.9% |
| 2004 | +19.3% | +7.9% | +11.3% |
| 2005 | +21.2% | +8.9% | +12.4% |
| 2006 | +50.1% | +20.9% | +29.1% |
| 2007 | -16.7% | -13.7% | -3.0% |
| 2008 | -23.8% | -26.1% | +2.3% |
| 2009 | +31.5% | +13.4% | +18.1% |
| 2010 | +16.1% | +32.9% | -16.8% |
| 2011 | -8.8% | +4.1% | -12.9% |
| 2012 | +3.1% | +20.9% | -17.8% |
| 2013 | +20.7% | +24.5% | -3.8% |
| 2014 | +7.6% | +7.4% | +0.2% |
| 2015 | +6.4% | +3.4% | +3.0% |
| 2016 | +27.3% | +17.7% | +9.5% |
| 2017 | +8.2% | +14.3% | -6.2% |
| 2018 | -2.7% | +10.9% | -13.6% |
| 2019 | -1.0% | +7.1% | -8.1% |
| 2020 | +37.0% | +40.7% | -3.6% |
| 2021 | -13.6% | -10.2% | -3.4% |
| 2022 | +9.6% | +18.3% | -8.7% |
| 2023 | +4.3% | +24.6% | -20.3% |
| 2024 | +11.0% | +14.7% | -3.6% |
Risk-Adjusted: The Best Sharpe in the Series
Sharpe ratio of 0.429 across 25 years. That's the headline. It reflects a combination of decent absolute returns (8.14% CAGR) and low volatility (17.79% annualized). Most markets in this series produce higher CAGRs but with proportionally higher volatility. Switzerland's ratio of return-to-risk is the best tested.
The 69.27% down capture confirms the downside story. For every 100 basis points SPY fell, Switzerland fell roughly 69. Across multiple bear markets, dot-com (2000-2001), the GFC (2007-2008), rising rates (2022), the portfolio consistently fell less.
CHF is also a structural factor here. The Swiss franc is a traditional safe-haven currency. In risk-off environments, capital flows into CHF, which appreciates against USD. That means CHF-denominated assets look better in USD terms during crashes. This isn't captured in the backtest (returns are in CHF, benchmark in USD) but it does mean real Swiss investors saw their purchasing power hold up better during global crises than the raw CHF numbers show.
The Early Decade Lead (2000–2006)
Switzerland outperformed SPY in every year from 2000 to 2006. That's seven consecutive years of excess return, including protecting capital during the dot-com bust (2000: +10.9% vs -14.8% for SPY) and recovering faster from it. The 2006 year was the outlier in this run: +50.1% vs +20.9%, a 29.1 point gap. The concentration of the 23-stock portfolio meant that when Swiss quality companies had a strong year, the equal-weight construction amplified the outcome.
The Middle Decade Drag (2010–2013)
Four years of mostly underperformance followed the GFC recovery. 2010: +16.1% vs +32.9% (-16.8%). 2012: +3.1% vs +20.9% (-17.8%). This stretch coincided with the US market's recovery being driven primarily by large-cap growth technology. Apple, Google, Amazon. None of that appears in the Swiss universe. The portfolio's defensive, quality-oriented composition lagged a growth-driven US recovery.
The Sharpe ratio incorporates this drag and still comes out highest in the series. The consistency across the full 25 years, even including a mediocre middle decade, is what drives it.
Currency as a Natural Hedge
CHF tends to appreciate against USD during global stress events. This is a known historical pattern tied to Switzerland's political neutrality, current account surplus, and safe-haven demand. For an investor holding CHF-denominated assets, the effective USD return during downturns was better than the CHF-only numbers show. The GFC example: portfolio fell 23.8% in CHF, but CHF appreciated against USD by roughly 5-7% during the same period. US investors measuring Swiss returns would have seen a smaller loss in USD terms.
This doesn't appear in the backtest numbers, but it's the reason Switzerland is often considered a natural diversifier for US-heavy portfolios.
Backtest Methodology
| Parameter | Value |
|---|---|
| Universe | SIX, market cap > CHF 500M |
| Period | July 2000 – July 2025 |
| Rebalance | Annual, July |
| Weighting | Equal weight |
| D/E threshold | < 0.5 (annual FY statements) |
| Piotroski minimum | F-Score >= 7 |
| Cash rule | < 10 qualifying stocks → hold cash |
| Benchmark | SPY (S&P 500 Total Return) |
| Returns | Portfolio in CHF, SPY in USD |
| Data lag | 45-day point-in-time |
| Data source | Ceta Research / FMP warehouse |
Limitations
Currency mismatch and safe-haven bias. CHF isn't a neutral comparison to USD. The safe-haven properties of the franc create a structural tail wind for Swiss-denominated portfolios during global risk-off periods. This partially flatters the down-capture metric. A fair comparison for a US investor would hedge the CHF/USD exposure.
CAGR vs Sharpe trade-off. Switzerland's +0.30% CAGR excess is the narrowest in the series among outperforming markets. Investors optimizing for total wealth accumulation would prefer markets like India or Canada. Switzerland's case rests on risk-adjusted performance, not outright growth.
Swiss financial sector exclusion. Banks like UBS and Credit Suisse (prior to its failure) would be excluded by D/E < 0.5 due to deposit leverage. This sector represents a large chunk of Swiss market cap. The portfolio systematically underweights Swiss financials, which creates a structural bias that wouldn't exist in the index.
No transaction costs. Annual rebalancing of 23 stocks has friction. Swiss transaction taxes and brokerage costs would reduce real returns modestly.
Point-in-time lag. The 45-day data lag means July rebalances use the most recent annual filings available as of late June. For companies with December fiscal year-ends, data may be 6+ months old at rebalance. This creates some staleness in the financial ratios used for screening.
Takeaway
Switzerland won't make you rich faster than India or Canada. It isn't designed to. The case for Switzerland is risk-adjusted: the highest Sharpe in the series (0.429), low volatility (17.79%), down capture of 69.27%, and zero cash periods across 25 years.
The structural alignment between Swiss corporate culture and the Low Debt Quality signal is real. Pharma, consumer staples, and specialty industrials dominate the qualifying universe. These industries have pricing power, recurring revenue, and balance sheets that don't need leverage to sustain margins. The Piotroski filter then selects the ones that are actively improving.
For investors who care as much about how they earn returns as how much, Switzerland is the strongest result in this series.
Part of a Series
This post is part of the Low Debt Quality backtest series, tested across 13 markets:
Run This Screen Yourself
The SQL above runs on live TTM data. It surfaces today's qualifying Swiss companies using the balance sheet and profitability filters. A full Piotroski score requires multi-year annual statements (the backtest computes this per stock each July), but the D/E filter combined with the other quality checks gives a reasonable current read on the universe.
Run It Yourself
Explore the data behind this analysis on Ceta Research. Query our financial data warehouse with SQL, build custom screens, and run your own backtests across 70,000+ stocks on 20 exchanges.
Data: Ceta Research, FMP financial data warehouse. Returns in CHF. Annual rebalance July, equal weight, 2000–2025.
