The weekly digest — 30.10.24

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 will become entitled to our dividend from Apple next week. So, what is so special about the company’s playbook? In 1976, Steve Jobs and Steve Wozniak founded Apple with only $1300. Since then, Apple has enjoyed a meteoric rise to the world’s cream of technology companies, generating more than $380 billion in sales in 2023 alone. It is the first US company to reach a market value of more than one trillion and it is Warren Buffett-approved; Berkshire Hathaway became an Apple owner in 2016. In 1987, the company initiated dividend payments and later, in 2011, when Tim Cook became CEO, he implemented a policy of consistent dividend increases. Apple has prioritised allocating its massive cash flow towards share buybacks which, together with its increasing dividend, have contributed to its stock outperformance, such that it has increased about 14x under Cook’s leadership. Apple’s indispensability with users — who rely on its products for music, apps, calls and most recently, payments — has generated multiple and varied royalty streams, cementing its privileged position. Plus, having reached a record-high installed base of two billion active devices, the company stands to benefit enormously as these devices reach maturation and require replacement, generating a virtuous cycle through which the company can extend its dividend trajectory.

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.