"What about those great companies you're missing?"

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watchnerd
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Re: "What about those great companies you're missing?"

Post by watchnerd »

Da5id wrote: Tue May 18, 2021 5:05 pm
watchnerd wrote: Tue May 18, 2021 5:02 pm
Robot Monster wrote: Tue May 18, 2021 3:24 pm Hi everyone! Goodness gracious. A little disconcerting that a post of mine created August of last year has such staying power.

I choose those four companies simply because they were in Vanguard Wellington's portfolio holdings, and (as of 03/31/2021, at least) they continue to be. If it is such a no brainer to dump them based on their underperformance in recent years relative to the US Total Stock Market, then, Wellington must be super stupid.
Wellington holds 67 stocks.

If I'm doing my math right, using those 67 stocks, the set of possible 4 stock portfolios we could compare to TSM is 1072.

This thread could get really really long.....
67 choose 4 is 766,480. So lots of combinations :)
I thought I was making an error.

Okay, 1 down, 766,479 left to go!

This thread is going to be really long....
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Scooter57
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Re: "What about those great companies you're missing?"

Post by Scooter57 »

There are very few "great stocks" among the stocks in the International indexes, if by "Great Stock" you mean a company that has the potential to greatly raise its earnings over a period of decades. The international stocks with a few exceptions are mostly those of old, established, slower growing companies in the consumer products and food industries, cyclical financials, local utilities, and companies in extractive industries like mining and oil.

Microsoft was extremely over valued after the dot.com crash and its price had gotten way ahead of its earnings, but it had a huge potential nevertheless which led to steadily growing earnings year in and year out. It has continued to grow its international business aggressively, too, gotten into new niches like Cloud and gaming, and has become a monster. Nestle, Astra Zenica, etc, just don't have the potential to grow like that.

I was more excited about international funds until I spent some time analyzing what stocks were actually in them and which of those made up the bulk of the fund or ETF by weight. Then I realized that international stocks are not some airy concept that is "on sale."At all. International stocks are almost always priced properly for the kinds of companies that issue them.

You would do better to invest in a subset of international aggressive growth if you feel like you have to have international stocks, some of those are on sale, but that is because they have significant risks, like Chinese internet stocks like BABA etc. With that risk you might get some reward. Or not. They call it "risk" because it is risky. Meanwhile, the giant US companies operate all over the world and will often buy anything foreign that looks like it might go somewhere. So it isn't as if you don't have lots of international exposure with a Total Stock Market fund or ETF.
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Re: "What about those great companies you're missing?"

Post by Nathan Drake »

Scooter57 wrote: Tue May 18, 2021 5:11 pm There are very few "great stocks" among the stocks in the International indexes, if by "Great Stock" you mean a company that has the potential to greatly raise its earnings over a period of decades. The international stocks with a few exceptions are mostly those of old, established, slower growing companies in the consumer products and food industries, cyclical financials, local utilities, and companies in extractive industries like mining and oil.

Microsoft was extremely over valued after the dot.com crash and its price had gotten way ahead of its earnings, but it had a huge potential nevertheless which led to steadily growing earnings year in and year out. It has continued to grow its international business aggressively, too, gotten into new niches like Cloud and gaming, and has become a monster. Nestle, Astra Zenica, etc, just don't have the potential to grow like that.

I was more excited about international funds until I spent some time analyzing what stocks were actually in them and which of those made up the bulk of the fund or ETF by weight. Then I realized that international stocks are not some airy concept that is "on sale."At all. International stocks are almost always priced properly for the kinds of companies that issue them.

You would do better to invest in a subset of international aggressive growth if you feel like you have to have international stocks, some of those are on sale, but that is because they have significant risks, like Chinese internet stocks like BABA etc. With that risk you might get some reward. Or not. They call it "risk" because it is risky. Meanwhile, the giant US companies operate all over the world and will often buy anything foreign that looks like it might go somewhere. So it isn't as if you don't have lots of international exposure with a Total Stock Market fund or ETF.
Companies don’t need to be sexy or exciting growth plays to have great compounded earnings.

In fact, investors tend to overpay for such growth and loses out to these value companies over the long term.
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Re: "What about those great companies you're missing?"

Post by Robot Monster »

AlwaysLearningMore wrote: Tue May 18, 2021 3:50 pm Those 4 stocks were chosen by another poster as examples of "great stocks" a US-only investor would be missing. I wanted to know if holding those in addition to TSM would have added to returns over the maximum holding period I could find at M*. It didn't.
What is unclear is the conclusion you are drawing from this. Should, for instance, Wellington dump those four stocks because they underperformed the US Total Stock Market in recent years? If they're going to dump Nestle, though, I kinda feel like they should also dump all the US companies that underperformed Nestle. So...
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Re: "What about those great companies you're missing?"

Post by donaldfair71 »

AlwaysLearningMore wrote: Tue May 18, 2021 12:48 pm
Nathan Drake wrote: Tue May 18, 2021 12:33 pm
AlwaysLearningMore wrote: Tue May 18, 2021 12:19 pm
Nathan Drake wrote: Tue May 18, 2021 12:05 pm
AlwaysLearningMore wrote: Tue May 18, 2021 11:56 am

It appears as though Microsoft more than held its own against Total International, not just recently. (M* can track back to January 1997.)
Image
“Held its own” meaning performed poorly for a very long time? Yes

Until it didn’t
Seems Microsoft has had better returns than VG Total International when comparing as far back as January 1997 (as far back as I can find on M*).
This thread was started with the premise of looking at "all the great companies you're missing out on e.g. Nestle, Total SA, Novartis, AstraZeneca."
They were effectively a wash until very recently
Your words "...performed very poorly for a long time...."
Yet as far as I can tell, Microsoft has always performed better than Vanguard Total Int'l.
How has it performed against Total US?
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Re: "What about those great companies you're missing?"

Post by abuss368 »

starboi wrote: Tue May 18, 2021 11:10 am Sounds like they're on sale, then.
Or as Jack Bogle has so often stated “maybe there is a reason they are that cheap”.

Tony
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Re: "What about those great companies you're missing?"

Post by abuss368 »

AlwaysLearningMore wrote: Tue May 18, 2021 10:56 am Out of curiosity I wanted to look at the point brought up about "all the great companies you're missing out on e.g. Nestle, Total SA, Novartis, AstraZeneca."
e.g., https://tinyurl.com/yzbdmw84

So I looked for a rough estimate as to how those companies have fared against US TSM.
The furthest back I could find on M* to compare all was January 6, 2003:
Image

(Personally, I have held a modest allocation to int'l equities, so the poor performance of int'l hampered my returns as well.)
Thank you for sharing. That is incredible actually. I have always found international a complete head scratcher! How can excellent companies like you listed not perform better historically than they have. Perhaps the future will be different.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: "What about those great companies you're missing?"

Post by Triple digit golfer »

The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
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Re: "What about those great companies you're missing?"

Post by anon_investor »

Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
But VTSAX and chill wins, what's the problem? :twisted:
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Re: "What about those great companies you're missing?"

Post by watchnerd »

Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous.
Time to unsubscribe, methinks.
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Re: "What about those great companies you're missing?"

Post by abuss368 »

Many investors are questioning the validity of international investing. The future may or may not be different.

For some owning all markets is important. For others the preference is US only. It is important to determine what is the best strategy for you. Everything else is simply noise!

Tony
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AlwaysLearningMore
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Re: "What about those great companies you're missing?"

Post by AlwaysLearningMore »

Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
It's quite simple, really. In a previous thread someone listed some "great stocks" that a US-only investor would be missing I wanted to know if adding those to a US-only portfolio would have moved the needle over the longest holding period I could find at M*. I didn't choose those 4 stocks, the poster (per hyperlink in OP) did. It turns out those stocks would have moved the needle, but in the wrong direction.
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Re: "What about those great companies you're missing?"

Post by Nathan Drake »

AlwaysLearningMore wrote: Tue May 18, 2021 7:27 pm
Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
It's quite simple, really. In a previous thread someone listed some "great stocks" that a US-only investor would be missing I wanted to know if adding those to a US-only portfolio would have moved the needle over the longest holding period I could find at M*. I didn't choose those 4 stocks, the poster (per hyperlink in OP) did. It turns out those stocks would have moved the needle, but in the wrong direction.
Maybe they are great. How do you know what their performance will be like in 10 years?
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Re: "What about those great companies you're missing?"

Post by AlwaysLearningMore »

Robot Monster wrote: Tue May 18, 2021 6:03 pm
AlwaysLearningMore wrote: Tue May 18, 2021 3:50 pm Those 4 stocks were chosen by another poster as examples of "great stocks" a US-only investor would be missing. I wanted to know if holding those in addition to TSM would have added to returns over the maximum holding period I could find at M*. It didn't.
What is unclear is the conclusion you are drawing from this. Should, for instance, Wellington dump those four stocks because they underperformed the US Total Stock Market in recent years? If they're going to dump Nestle, though, I kinda feel like they should also dump all the US companies that underperformed Nestle. So...
The only answer I sought was to check to see if the 4 "great stocks" you mentioned would have added to the returns of a US-only equity investor, over the longest holding period I could find at M*. They did not.
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Re: "What about those great companies you're missing?"

Post by Nathan Drake »

AlwaysLearningMore wrote: Tue May 18, 2021 7:31 pm
Robot Monster wrote: Tue May 18, 2021 6:03 pm
AlwaysLearningMore wrote: Tue May 18, 2021 3:50 pm Those 4 stocks were chosen by another poster as examples of "great stocks" a US-only investor would be missing. I wanted to know if holding those in addition to TSM would have added to returns over the maximum holding period I could find at M*. It didn't.
What is unclear is the conclusion you are drawing from this. Should, for instance, Wellington dump those four stocks because they underperformed the US Total Stock Market in recent years? If they're going to dump Nestle, though, I kinda feel like they should also dump all the US companies that underperformed Nestle. So...
The only answer I sought was to check to see if the 4 "great stocks" you mentioned would have added to the returns of a US-only equity investor, over the longest holding period I could find at M*. They did not.
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Re: "What about those great companies you're missing?"

Post by Da5id »

abuss368 wrote: Tue May 18, 2021 6:42 pm Thank you for sharing. That is incredible actually. I have always found international a complete head scratcher! How can excellent companies like you listed not perform better historically than they have. Perhaps the future will be different.
You say "I have always", but I thought you had switched from having international to not having it. Was it a head scratcher when you bought it? If so, why *did* you buy it? Very confusing.
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Re: "What about those great companies you're missing?"

Post by Da5id »

AlwaysLearningMore wrote: Tue May 18, 2021 7:27 pm
Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
It's quite simple, really. In a previous thread someone listed some "great stocks" that a US-only investor would be missing I wanted to know if adding those to a US-only portfolio would have moved the needle over the longest holding period I could find at M*. I didn't choose those 4 stocks, the poster (per hyperlink in OP) did. It turns out those stocks would have moved the needle, but in the wrong direction.
I'm still baffled by your logic. Do you believe past results are that strongly determinative of future returns for stocks?

The poster said these might be good stocks to own as part of a diversified portfolio (because Wellington owns them apparently he says above)
You graphed the past results of those stocks vs VTI
????

What precisely is your conclusion? That he is wrong that they are good stocks to own because they have underperformed in the past? If stock investing were that simple, surely you could simply screen out stocks that have not performed well in the past and trivially outperform VTI. Do you think that would work well?!?

My belief is that your reasoning doesn't seem to make sense totally independent of the US vs Int'l flavor it comes with.
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Re: "What about those great companies you're missing?"

Post by Triple digit golfer »

Nathan Drake wrote: Tue May 18, 2021 7:32 pm
AlwaysLearningMore wrote: Tue May 18, 2021 7:31 pm
Robot Monster wrote: Tue May 18, 2021 6:03 pm
AlwaysLearningMore wrote: Tue May 18, 2021 3:50 pm Those 4 stocks were chosen by another poster as examples of "great stocks" a US-only investor would be missing. I wanted to know if holding those in addition to TSM would have added to returns over the maximum holding period I could find at M*. It didn't.
What is unclear is the conclusion you are drawing from this. Should, for instance, Wellington dump those four stocks because they underperformed the US Total Stock Market in recent years? If they're going to dump Nestle, though, I kinda feel like they should also dump all the US companies that underperformed Nestle. So...
The only answer I sought was to check to see if the 4 "great stocks" you mentioned would have added to the returns of a US-only equity investor, over the longest holding period I could find at M*. They did not.
I am not investing for yesterday. Are you?
It is incredible that on this board, of all places, people constantly talk about past performance as if it is of any relevance.
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Re: "What about those great companies you're missing?"

Post by AlwaysLearningMore »

Da5id wrote: Tue May 18, 2021 7:40 pm
AlwaysLearningMore wrote: Tue May 18, 2021 7:27 pm
Triple digit golfer wrote: Tue May 18, 2021 6:54 pm The whole idea of this thread is ridiculous. Four individual companies compared to an entire country of stocks over one specific time period.

Lots of people using past performance to make decisions and project the future.

Lots of people assuming that good companies make good investments. In fact, the opposite is usually the case.

Why do so many people think they know more than the market? Most wouldn't make sector, style, or size bets and would say they don't know more than the market, but will gladly make a very large country bet.
It's quite simple, really. In a previous thread someone listed some "great stocks" that a US-only investor would be missing I wanted to know if adding those to a US-only portfolio would have moved the needle over the longest holding period I could find at M*. I didn't choose those 4 stocks, the poster (per hyperlink in OP) did. It turns out those stocks would have moved the needle, but in the wrong direction.
I'm still baffled by your logic. Do you believe past results are that strongly determinative of future returns for stocks?
The only intent was to see if those 4 stocks ("great stocks" a US-only equity investor would be missing, as listed in the hyperlink in the OP) would have moved the needle in the positive direction, over the longest holding period I could find at M*. Nowhere in my post will you find any prognostication.
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Re: "What about those great companies you're missing?"

Post by WarAdmiral »

The performance of VTSAX in last 5 years is more like a anomaly and unlikely to be repeated
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Re: "What about those great companies you're missing?"

Post by Robot Monster »

AlwaysLearningMore wrote: Tue May 18, 2021 7:31 pm
Robot Monster wrote: Tue May 18, 2021 6:03 pm
AlwaysLearningMore wrote: Tue May 18, 2021 3:50 pm Those 4 stocks were chosen by another poster as examples of "great stocks" a US-only investor would be missing. I wanted to know if holding those in addition to TSM would have added to returns over the maximum holding period I could find at M*. It didn't.
What is unclear is the conclusion you are drawing from this. Should, for instance, Wellington dump those four stocks because they underperformed the US Total Stock Market in recent years? If they're going to dump Nestle, though, I kinda feel like they should also dump all the US companies that underperformed Nestle. So...
The only answer I sought was to check to see if the 4 "great stocks" you mentioned would have added to the returns of a US-only equity investor, over the longest holding period I could find at M*. They did not.
Okay, but you must have some sort of conclusion you're drawing from this, some kind of investing insight, something actionable, etc...?
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Re: "What about those great companies you're missing?"

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