Stockpicking Is (Really) Difficult
This time six years ago, when we were all cooped up at home, no company could have possibly looked better placed than Amazon. Almost overnight the company became an integral part of our day to day lives (if it wasn’t already).
And this amazing business more than took advantage of the cards they were dealt, almost doubling their annual revenue from $386 billion in 2020 to $717 billion in 2025. Net income grew from $21.3 billion to $77.7 billion during the same period.
But over the past six years the stock has underperformed the S&P by around 50%.
At the same time, Guinness has enjoyed a real renaissance amongst all you non-Irish folks out there.
And Diageo (who own Guinness) saw their earnings grow by 33% from 2020-2025. This might not sound all that exciting, but for a “consumer staples” company who sell the stuff that we all need/desperately want to buy regularly - this is impressive.
Over the past five years though, the stock has not just massively underperformed the FTSE 100. It’s underperformed a basket of its peers.
Post COVID there was a surge in home moves in the US, but that has fallen off a cliff recently as interest rates have picked up. Everyone is staying put for now, but home prices have been largely unaffected.
With house prices resilient but moves on hold, one might reasonably expect Home Depot (who provide building supplies to the general public for home improvements) to have done well.
And yet…
A wise man once told me that people absorb messages best when the case is presented as three points1, so I’ll leave it there. There are loads more examples, you catch my drift.
You can do everything right - pick a “great company”, with a market leading position in a sector with an extremely supportive economic backdrop. Heck, you can even predict the narrative correctly ahead of time, and still massively underperform the index.
Because the simple truth is that most stocks underperform their respective indices over sensible timeframes.
The stats tell us that stock picking is a high effort, low success endeavour. An asymmetric use of effort. There are almost certainly better uses of your time.
Like watching the golf! Have a lovely weekend.
None of the above is intended to constitute investment advice to any individual. If you have specific queries regarding your individual position, then please consult to contact a regulated financial adviser.
Hi Livo!
Your commitment to the weekly article continues to impress me 🫡