By Eric Bush, CFA - Gavekal Capital Blog
A former mentor of ours used to say, "if you want to outperform your benchmark, you must have a portfolio of stocks that are outperforming the benchmark." This of course is very obvious but very true at the same time. It is very hard to outperform (or make money in an absolute sense) if the majority of your holdings aren't holding up their end of the bargain.
Over the past 50 days, it's been pretty easy to find stocks that have had positive performance. 73% of developed market stocks are up over the past 50 days compared to just 14% of stocks on February 11th. It's been a bit harder to find stocks that are outperforming the MSCI World Index as 55% of developed world stocks have outperformed the MSCI World Index over the past 50 days. As the second chart below shows, the percentage of stocks that outperform the MSCI World Index vacillates between about 40% to 60%, so the current reading is actually closer to the high end of the range than the low end.
The Past 50 Days Investors
In the table below, we show the percentage of stocks in each developed market country that have had positive performance over the past 50 days. Not a single country has had less than 56% of its stocks experience positive performance (in USD) during this time frame. Smaller equity markets such as New Zealand and Singapore have seen 100% of its stocks rise over the past 50 days. Even in a diversified market such as in the United States, more than 4 out 5 stocks are higher than they were 50 days ago.
However, if investors focused their capital in a few select markets (and avoided a few others) they could have greatly increased their success hit rate. To have outperformed the MSCI World Index over the past 50 days investors would have wanted to stay away from most of Europe and Japan. Instead, it paid to invest in more commodity oriented markets such as Canada and Australia. The US was a good place to be as well as 59% of the stocks in the US have outperformed over the past 50 days.