13 Aug 2019
US Listed Companies: 1,092 Winners
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
This research paper helps to explain the difficulty of using a buy and hold strategy for investing in listed companies.
The research reviews the performance of 25,332 listed companies in the United States across 90 years to discover that only 1,092 listed companies (4.31%) collectively account for all stock market gains above the return from the one month US Treasury Bill rate over the same period.
Furthermore, the return from 9,579 listed companies (37.81%) offset the wealth destruction of the remaining 14,661 listed companies (57.88%) meaning that investing in the bulk 24,240 listed companies would have matched the dollar gains earned from the one month US Treasury Bill rate.
Click for chart.
This is why at Newealth we recommend that clients hire professional management teams to buy and sell listed companies as their valuation (share price) is stretched below and above their intrinsic/enterprise value.
The skills needed by the very best professional managers to work out the intrinsic/enterprise value of a listed company involves a combination of both science and art which is why it is so difficult for part time investors to replicate.
Click for research paper.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.