The weekly digest — 18.09.24

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 just received our dividend from Johnson & Johnson. Established in 1886 by a trio of Johnson brothers, the company was originally founded to produce antiseptics, evolving into a global healthcare pioneer with breakthrough discoveries including contraceptives and semi-permanent contact lenses. Today, it is a classic blue-chip company; it is one of the few companies with a dividend growth record exceeding 60 years and one of only two US companies with the strongest AAA credit rating. What is the pay-off? This edge allows J&J to access the credit markets at the lowest possible interest rates worldwide — a significant business advantage. The double-edged sword? Given J&J is a healthcare trailblazer, it is often legally challenged. For example: in September 1982, seven Tylenol samples were found to be tampered with, leading J&J to immediately withdraw Tylenol everywhere. Since then, its instantaneous response has been praised as the gold standard for crisis management. Fast-forward to 2023, when the company spun its consumer division (now Kenvue) to shareholders, J&J has positioned itself to focus on more research-intensive but faster-growing and higher-margin pharmaceutical and med-tech businesses today, such that it can continue to innovate in the future.

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.