I’m a big ice hockey fan! To be more specific, I’m a big Philadelphia Flyers fan! Of the four major North American sports, ice hockey ranks fourth in popularity.
I think for many people, the lack of goal scoring makes ice hockey seem less exciting than other sports. For me, it’s the anticipation of goal scoring that holds my attention. If I get out of my seat for a minute or two to get a snack or go to the restroom, I might miss a goal or even two.
Depending on the game, that could be the extent of the scoring for the period or even the entire game. For that reason, I stay glued to the game action!
Our investment approach follows a similar principle of focus and anticipation.
In this article, the third in our 2024 in Review Series we review the performance of our chosen strategy by comparing results over the past year and longer periods of time. Sometimes, what looks fast and good may end up not being supported by the evidence as a sound strategy.
Reviewing the Data: One Year Versus Ten Years
We overweigh our portfolios to three distinct factors: value stocks over growth stocks, small companies over large companies, and more profitable companies over less profitable companies.
The Global Premium Returns for the three factors in 2024:
- Large companies outperformed small companies by 11.4%.
- Growth companies outperformed value companies by 8.2%.
- High profitability companies outperformed low profitability companies by 2.1%.
After looking at the data in this PDF, you might ask why we adhere to this investment strategy. However, when examining performance over a longer timeframe, a different picture emerges. Using 10-year rolling periods:
- Small companies outperform large companies more than 65% of the time.
- More reasonably priced companies outperform more expensive companies more than 75% of the time.
- More profitable companies outperform less profitable companies more than 90% of the time.
Over the long run, the difference in return for each of these factors ranges from 2% to 4% per year.
The Master’s Approach: Evidence-Based Investing
It can be tempting to reconsider our approach after seeing the performance from 2024. But just like with the game of ice hockey, staying in your seat is critical if you don’t want to miss any of the action. We remain confident in the research showing that these factors are persistent over time.
Patience and focus—whether in investing or cheering for your favorite team—are the keys to long-term success.
If you’re interested in more extensive data on evidence-based investing, you can find it here. Reach out to our team with any questions, or if you would like us to help you review your strategy.