The weekly digest — 22.01.25

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 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 received our latest dividend from Illinois Tool Works (ITW) last week. ITW has one of the longest documented dividend growth records, having increased its dividend consecutively for the last 61 years. Established in 1912 by four brothers from the prominent Chicago-based Smith family, ITW was founded upon the astute observation that a burgeoning midwestern economy could benefit from better machine tools and parts than were available at existing small machine shops. Through careful scrutiny of manufacturing processes, the brothers were able to identify how a certain tool or part could significantly improve the overall process — then set about developing said tool or part. This approach led to initial success in metal-cutting tools, followed by leadership in metal fasteners and plastic fasteners. Fortuitously, ITW’s timing coincided with the acceleration of the motor industry, and its parts solved stubborn auto manufacturing bottlenecks. Later, the company’s plastic fasteners precipitated the invention of a flexible plastic collar to hold beverage cans, saving the beverage industry up to 40 per cent in packaging costs. Cut to today: ITW has more than 16,000 patents shielding its $16 billion in annual revenues. As ever, the company remains focused on optimising, recognising any manufacturing process as a potential growth opportunity through which it can reinforce its favourable position in its second century of business.

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.