The Best Investment Writing Tim Alcorn, Baillie Gifford – Lessons from Bessembinder
Aug 10, 2024
Tim Alcorn, Head of Investment Risk for Baillie Gifford, discusses insightful lessons from Professor Hendrik Bessembinder's research. He emphasizes how a small number of companies account for most long-term gains, urging investors to focus on nurturing successful investments. Alcorn highlights key strategies that separate top performers like Apple and Amazon from the rest, including R&D and understanding market dynamics. He also stresses the necessity of building connections with company leaders to better assess potential for success and manage investment risks.
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Small Percent Drive Market Gains
- Only a tiny fraction of stocks drive the entire market's gains over decades.
- Bessenbinder's research shows the best-performing 3% of US stocks accounted for all net gains since 1926.
Global Stock Return Skewness
- Global stock returns are even more skewed than US returns.
- About 61% of non-US stocks underperform Treasury bills; only 1.3% create all net gains internationally.
Focus on Growth and R&D
- Invest in companies focusing on rapid organic growth and heavy R&D spending.
- Prioritize firms growing assets and cash, as these traits correlate with superior long-term returns.