Batting Average of Stocks Hits All Time Lows

In our last paper “The Collision of Arithmetic & Over-Optimism”, Kailash presented a compelling chart demonstrating that investor obsession with the 25 largest growth firms had driven them to record valuations. The chart below shows that the odds of picking a stock that beats the index has only been lower at the peaks of the Internet Bubble and Nifty Fifty mania. It also reveals that shortly after moments like these, the opportunity to outperform the index moves dramatically in your favor.

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Kailash Capital Research, LLC ’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias. L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded.

ADDITIONAL READING

The topics discussed in this article are aimed at seasoned professionals, as such, we have included some extra reading for anyone seeking out more information related to the topics above.

SOURCES

Disclaimer

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