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Michael Mauboussin: Best Investment Charts of 2024

In his latest article, Michael Mauboussin presents a collection of their most interesting and controversial charts and insights from their reseach. These findings challenge conventional wisdom in areas like valuation metrics, capital allocation trends, and corporate performance while offering data-driven insights into evolving economic and investment dynamics.

Here are 5 key takeaways:

  • Market Valuation Trends: The equity market value-to-GDP ratio (popularized by Warren Buffett) has fluctuated significantly over decades, peaking at 233% in 2021 before declining to 187% in 2023. Factors such as globalization and digitalization have complicated historical comparisons of this ratio.
  • Empirical Regularities in Social and Economic Systems: The document explores scaling laws like Kleiber’s Law (biological systems) and Zipf’s Law (social systems). For example, the revenue-to-GDP distribution of Fortune 500 companies follows a power law, highlighting the dominance of a few large firms.
  • Shift in Capital Intensity: Technology companies, traditionally less capital-intensive than energy companies, now invest heavily in tangible assets due to cloud computing and generative AI. By 2023, tech companies’ capital expenditures surpassed those of energy firms, reversing the historical trend.
  • Corporate Life Cycle Insights: Contrary to conventional narratives, companies often achieve high returns on invested capital (ROIC) at IPOs but see these returns stabilize or decline over time. A dynamic life cycle analysis provides a more nuanced method for assessing company stages compared to static age-based metrics.
  • Investment Management Trends: Mutual fund turnover rates have declined since 2010, indicating longer investment horizons for actively managed funds. Meanwhile, stock market concentration has risen sharply, with the top 10 U.S. stocks accounting for 27% of total market capitalization in 2023.

Some [charts] were a challenge to conventional wisdom, including the capital intensity for energy versus technology companies, the ROIC-to-WACC spread by company age, and the time horizons for mutual funds. Others addressed empirical observations that remain unexplained, among them the charts on scaling laws.

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Disclaimer of liability

The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.

Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk

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