This article, "In Praise of How Not to Invest", appeared in last weekend's issue of Barron's. According to the article:
- Companies that are the fastest market-share growers underperform
- Companies that are growing assets the fastest also underperform
It's another example of how it is not growth, in itself, that matters. Investor with faith in buying growth to in order to produce above average returns might want to take notice.
As Jeremy Grantham said in an interview with Morningstar back in May:
"...in the end, returns in a stock market are overwhelmingly to do with return on capital (ROC). It isn't about top line growth. Nobody believes this but it's true. Growth stocks simply don't beat value stocks. Growth countries, for the record, have no history of reliably beating slower growth countries. Although everyone thinks it's the case it won't stand the test of analysis."
Long-term returns come down to durable high ROC and the price you pay relative to intrinsic value....not necessarily growth.
The Growth Myth - Jun 2009
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