![]() ![]() However, shareholders had to endure a maximum drawdown in the same decade of 33% that lasted for 10 months. ![]() He found that, on average, the most successful 100 stocks created $US219 billion of wealth over a decade-long horizon. He then concentrated on the top 100 performing stocks, measuring their maximum peak-to-trough share price drawdowns. His more recent research focussed on the characteristics of those ‘outlier’ stocks, including their interim share price movements.īessembinder studied the wealth creation of all publicly listed US stocks across each of the seven decades from 1950 to 2019. In July 2020, Hendrick Bessembinder, a finance professor at Arizona State University, published a series of papers with an important and surprising conclusion: that even the stocks of companies that had created the most wealth for shareholders over a decade experienced deep and protracted share price reversals along the way – often several times.īessembinder had become well-known after he demonstrated that all the stock market’s value creation over the long run was concentrated in just a few stocks with extreme outperformance. Instead of raising alarm, it has been a great reminder that investors need to stay the course with winning businesses – the likes of Apple and Amazon – if they want to reap great rewards in the future. While the selloff in global equity markets early this year was unpleasant, it was not unusual. But the truth is that to achieve outstanding long-term returns, investors must be prepared to endure large drawdowns along the way – even for the best-performing stocks and portfolios. Investors have been promised an elixir of big returns and low volatility. ![]()
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