The weekly digest — 04.12.24
A Winning Machine
What is more powerful than a 101-year-old winning machine? Since 1923, the S&P500 index has generated an annualised return of ~10.5%. For more than a century, it has:
Beaten 99.9% of professional investors, who typically underperform the index annually by ~2-3%, with the gap widening dismally over time.
Proven its stellar compounding potential; $1 invested in the index in 1923 would be worth more than $13,000 today.
Comprised of the bluest of the world’s blue-chip stocks, self-regulating and re-weighting these in line with their individual performances — eliminating user selection error.
Always regained its previous highs, surviving the Great Depression, one World War and the Covid pandemic.
Weekly Digest
On a look-through basis, we recently received our dividend from Caterpillar, whose story began on Thanksgiving Day in 1904. It was then that its predecessor invented the first commercially viable track-type tractor to help farmers navigate soft soil — and which a company photographer aptly exclaimed crawled like a caterpillar. Following several mergers, the company as we know it took shape in 1925, becoming the number one producer of diesel engines by the 1930s. Today, it is a world leader in off-highway diesel and natural gas engines and the world’s leading manufacturer of construction and mining equipment, with 2023 sales exceeding $67 billion. So, how does a company generate these results? Caterpillar scored a branding coup when it changed its paint colour from grey to hi-way yellow, making it easily detectable day or night. The company also benefited from an early insight about the need for distribution and service centres to be close to its customers and to minimise downtime. That insight has engendered measurable advantages: with an installed base exceeding four million machines, Caterpillar’s after-sales service and maintenance is assured for many years, generating operating profit margins near 20 per cent and growing. Its ubiquitous footprint and high profitability have parlayed into an unbroken cash dividend since Caterpillar’s 1925 incorporation, including, notably, its current 32-year stretch of consecutive annual dividend increases.
To Have and To Hold
The greatest threat to our investment success? Us. So, how do we get ourselves from outset to outcome? Over four years, we’ve collected more than four million data points that demonstrate how a particular methodological communication keeps investors on track. This email is part of a powerful anticipatory feedback loop that works as a bad-decision buffer. With our handholding, evidence shows investors are far more likely to hold onto their investments — long enough to enjoy their wins.