By
Borsgade
In his latest article, Michael Mauboussin examines the demographics of public companies in the U.S., including how many are born, how long they live, why they die, and the returns they deliver to shareholders. This is highly relevant for investors as they approach valuation and portfolio construction. The skewness of outcomes is particularly striking.
Here are the key takeaways:
The skewness in corporate wealth creation suggests two potential investment approaches. The first is to seek broad diversification in an index fund. If the future is similar to the past, the outperformance of the wealth creators will more than make up for the underperformance of the losers. The second is to build a portfolio that seeks to avoid the wealth destroyers while owning the wealth creators.
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