The Meb Faber Show - Better Investing Hendrik Bessembinder - Do Stocks Outperform T-Bills? | #532
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May 3, 2024 
Hendrik Bessembinder, a professor at Arizona State University, discusses his research on stock market returns with Meb. They talk about power laws driving returns, the importance of holding onto winners, shared traits among top stocks, and challenges of mutual fund performance. Hank's findings emphasize diversification and the difficulty of retaining big winners in a portfolio.
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Individual Stock Performance
- Many individual stocks underperform treasury bills over the long run.
- A buy-and-hold return, assuming dividend reinvestment, can be misleading.
Power Law Returns
- The equity market premium is driven by a small number of high-performing stocks, not the typical stock.
- This positive skew in returns is similar to a power law distribution.
Altria's Outsized Returns
- Altria Group (formerly Philip Morris) had the highest buy-and-hold return (240 million percent) when Bessembinder last checked.
- This was driven by the societal value placed on so-called "sin stocks".