Quote · Excess Returns
The 100 Year Thinkers: Chris Mayer on SpaceX, AI Reckoning, and Why Early Is Overrated
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Why even a perfect stock picker would face brutal drawdowns
At 51:15 · chapter starts 47:02
The Worldly Partners study: 82% of 100-baggers fell 50%+, with a 65% average drawdown and 8-year waits between highs. Wes Gray's 'God portfolio' proves even perfect picks get punished. [1] — Chris Mayer "82% of the greatest compounders in history — stocks that returned 100x or more since 1972 — lost more than half their value at some point. …" 47:40 [2] — Chris Mayer "Wes Gray built the hypothetical 'God portfolio' — the perfect stocks over any 5-year period from 1927 to 2016. It still got hit with 35%+ d…" 50:40
82% of the greatest compounders in history — stocks that returned 100x or more since 1972 — lost more than half their value at some point. Average drawdown: 65%. Average return from starting point: 533x. The price of greatness is volatility.
A Worldly Partners study found that 82% of stocks that returned 100x or more since 1972 lost more than 50% of their market value at some point along the way.
The same Worldly Partners study found the average maximum drawdown for 100-bagger stocks was 65%, illustrating the brutal volatility required to capture exceptional long-term returns.
Despite brutal drawdowns, the stocks in the Worldly Partners study that became 100-baggers returned 533 times from their starting point on average.
The Worldly Partners study found that 100-bagger stocks went an average of 8 years between setting new all-time highs, requiring extraordinary patience from investors.
Wes Gray built the hypothetical 'God portfolio' — the perfect stocks over any 5-year period from 1927 to 2016. It still got hit with 35%+ drawdowns repeatedly. Any client would have fired God. The problem is never the stocks; it's the investor.
A study by Wes Gray (also associated with Michael Mauboussin) showed that a hypothetical 'God portfolio' — the objectively best stocks over any 5-year period — still suffered drawdowns of 35% or more, enough to get any manager fired.
