Top Reads, Listens, Follows & Takeaways of the week
Most stocks don’t outperform Treasury Bills?
Takeaways:
Hendrik Bessembinder’s 2018 paper, Do Stocks Outperform Treasury bills?, revealed that since 1926, 57% of listed stocks had lifetime buy-and-hold returns less than one-month Treasury bills. In terms of lifetime dollar wealth creation since 1926, the top performing 4% of listed companies explain the net gain for the entire US stock market. These alarming findings further highlight how difficult it is to pick individual stocks that outperform the market over long periods of time (and good luck beating treasury bills!).
With this in mind, individuals with significant, concentrated wealth in a single stock position would be wise to diversify. The odds are prohibitively low that your concentrated stock holding will be in the top 4% noted earlier. For index oriented investors, these findings highlight the benefit of equal weighted ETFs as opposed to market capitalization weighted ETFs. The paper demonstrates that stock returns are a positively skewed distribution (meaning that most stocks will be losers and a few winners will drive the returns). Check out the outperformance of RSP over SPY that illustrates this point.
The best performing stock of the past 20 years, and also the past 27 years, is…….Monster Beverage Corporation. Yes, the energy drinks sold at gas stations. Who would’ve guessed. Investing is hard.
Reads:
A serious proposal on US energy (here)
The dirty road to clean energy: how China’s electric vehicle boom is ravaging the environment (here)
Essential Wisdom From America’s Best-Performing Stocks (here) & academic paper (here)
The disaster that was El Salvador’s Chivo Wallet program (here)
Value Creation by Downtown Josh Brown (here)
The Harvard Crimson: Fire them all, the administrative bloat in higher ed (here)
Tensions at Salesforce between co-CEOs Benioff and Taylor before leadership change (here)
The island of stone money by Milton Friedman (here)
Whitey Bulger Killed After Inmates Were Tipped Off on His Prison Transfer (here)
Listens:
What Extreme Weather Events Are Doing to Global Insurance Markets (here)
Howard Marks on What Really Matters (here)
Bob Elliott and Meb Faber, A Macro Masterclass (here)
Ashvin Chhabra, CIO of Jim Simons family office, Euclidean Capital (here)
Follow, Watch & Other great content:
60 Minutes: Mad Scientist football coach Mike Leach (here)
Brent Beshore on buying small businesses (here)