Remarkably, just about half of all stocks have delivered positive performance YTD (on a USD basis). However, there has been a pretty meaningful difference in the tails of the performance distribution. Many more stocks have declined by large percentages than have gained by large percentages so far this. In fact, nearly twice as many stocks are down by at least 20% than are up by at least 20%.
In the histogram below, we show the YTD performance for nearly 2000 stocks in the developed world. Slightly more than one fifth of all stocks have gained between 0-10%. If you exclude this group of stocks, this histogram illustrates how tough it it has been for the other 80% of stocks. Far more stocks have experienced negative performance than positive performance YTD. If we break out performance by sector we can see that avoiding certain sectors and gaining exposure to others have greatly titled the odds in an investor’s favor.
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
It has certainly paid this year to avoid consumer discretionary and financials and to have overweight exposure to consumer staples, energy and utilities. While 39% of consumer discretionary and financials stocks have had positive performance YTD, there have been 4x as many stocks that have declined by 20% in these two sectors than have increased by 20%. Only 11% of stocks in these sectors have gained by 20% or more. Meanwhile, 44% of consumer discretionary and financial stocks are off by at least 20%. So the chances of picking a stock that is off by 20% has been greater than picking a stock that has had positive performance in these two sectors.
In comparison, odds of picking outsizes winners in the consumer staples, energy or utility sectors in 2016 have been pretty good. 34% of stocks in these three sectors have increased by at least 20% while only 11% of declined by 20%. Odds of picking a positive stock in general have been great in 2016. 75% of all stocks in these three sectors have had positive performance YTD.