An investment theme gaining traction among those purveyors of high-priced investment funds in our financial capitals is super-concentration. This makes sense because we’ve had a narrow market for the last few years where any handful of tech darlings in a portfolio would have produced market-stomping returns and the investment business loves to sell what has worked. Yet, as an investor observing from the outside, it is really hard to benchmark and judge a fund that has a few holdings— the standard benchmarks are significantly more diverse— and you never really know if the person who created the portfolio was just flat-out lucky (besides, he or she could have three other portfolios that failed). As my luck would have it, I stumbled across my very own super-concentrated (four stock) portfolio, which I think makes a great comparison index for any super-concentrated fund (soon to be coming to your town).
And so here it is. Unlike, the pitch that goes, “Buy Amazon or Google because they will dominate every industry known to man,” this four stock portfolio has some nice, demographic and network themes at play; kind of what Warren Buffett looks for when he buys auto insurance companies or fast food companies (e.g., the hope that demographic trends will give an extra lift over time). Mr. Buffett would love it — if he doesn’t already own it. What is it? Two words: Cards and towers. It is that insanely simple!
The two leading credit card companies, Mastercard and Visa, and then the two dominant cell tower companies, American Tower and SBA Communications, in equal weights. The results? Simply beyond any fund you’ll ever come across: A 47.0% annualized 10-year return from 2009 through 2018 and just a cumulative return of 4,596% versus 243% for the S&P 500 Index! (If you are interested, 2019 was a little better than average, up a cool 49.9%!)
Special dedication: This post is warmly dedicated to the overpaid fund managers that charge 2% management fees and 20% incentive fees to buy Amazon, Facebook and Google only to generate results that lag the S&P 500 Index! You’ve been fishing in the wrong pond my poor “Bro-financier” children!
Test Results and Chart