"One way to think about an investment in a public company is as a combination of two bets: a bet on the company’s future and a bet that shareholders will get their share of said future despite a lack of control." That last part seems to be what most people overlook, you are (as Whitman called it) OPMI -- Outside Passive Minority Interest, so you are in a disadvantaged position from the get-go.
This is an interesting idea but I'm not sure I understand the paper. Half of the market value in the US is in the S&P 100, the largest 2% of companies (5,000 or so listed companies in the US?) That means investors as a whole have half their money allocated to just 2% of stocks. So why would it be surprising that 4% of stocks account for all of the return? I feel like I'm missing something obvious...
Sobering. Reminds me of the thought exercise Buffett performs with Todd Coombs. I think you highlighted it once before. There really are only a handful of companies that can compound above 10% for a meaningful period of time.
Munger once commented that if he were to teach at business school, he would do it through charts. He would “try and relate the changes in the graph and in the data to what happened in the business.” That’s a very useful idea and I am surprised there is no central repository with the charts of failed companies
William O'Neill and his disciples (Qullamaggie, David Ryan, Mark Minervini are famous ones) started backwards. They picked the charts of the stocks that made lots of money, quickly and asked: what happened for these charts to be what they are? Fundamentally and 'technically'. And they reverse-engineered the investment method.
And they did the same with stocks that got obliterated, in order to stay away, improve their risk management.
"One way to think about an investment in a public company is as a combination of two bets: a bet on the company’s future and a bet that shareholders will get their share of said future despite a lack of control." That last part seems to be what most people overlook, you are (as Whitman called it) OPMI -- Outside Passive Minority Interest, so you are in a disadvantaged position from the get-go.
Great essay. Thank you.
Great essay and could be the title of a book!
This is an interesting idea but I'm not sure I understand the paper. Half of the market value in the US is in the S&P 100, the largest 2% of companies (5,000 or so listed companies in the US?) That means investors as a whole have half their money allocated to just 2% of stocks. So why would it be surprising that 4% of stocks account for all of the return? I feel like I'm missing something obvious...
Sobering. Reminds me of the thought exercise Buffett performs with Todd Coombs. I think you highlighted it once before. There really are only a handful of companies that can compound above 10% for a meaningful period of time.
Munger once commented that if he were to teach at business school, he would do it through charts. He would “try and relate the changes in the graph and in the data to what happened in the business.” That’s a very useful idea and I am surprised there is no central repository with the charts of failed companies
William O'Neill and his disciples (Qullamaggie, David Ryan, Mark Minervini are famous ones) started backwards. They picked the charts of the stocks that made lots of money, quickly and asked: what happened for these charts to be what they are? Fundamentally and 'technically'. And they reverse-engineered the investment method.
And they did the same with stocks that got obliterated, in order to stay away, improve their risk management.