Episode 399: The Boring Asset That Outperforms Most Stocks
On this week's Stansberry Investor Hour, Dan and Corey welcome Hendrik Bessembinder to the show. Hendrik is a business professor at Arizona State University. With more than 40 years of teaching experience and 25 years of consulting experience, he joins the podcast to impart some of what he has discovered over his decades of work.
Hendrik kicks things off by introducing himself and sharing how he got involved in teaching. After that, he talks about his breakthrough research studying the performance of stocks versus Treasury bills, why investing over a long time horizon is crucial, and the importance of finding a competitive advantage in the markets. Hendrik then compares stock picking with professional athletics, as both are rare skills that only small portions of the population excel at. And speaking about his research findings, he notes...
It's not just that most stocks underperform Treasury bills... [it's that] most stocks actually lose money compared to cash. The majority of stocks have negative returns in the long run. So when I found that, I was surprised.
Next, Hendrik reveals that he's skeptical of any system that alleges it can make you wealthy, because the markets are competitive and constantly evolving. He says it all comes down to probabilities – and trying to gain an advantage that will nudge those probabilities in your favor. Hendrik also explains why he believes now is "the best trading environment ever" for retail investors in terms of cost and reliability. And he gives his thoughts on passive investing, the Magnificent Seven stocks, and diversification...
If nobody's being a fundamental analyst or technical analyst – if nobody is looking for misvalued securities – then why should we have correctly valued securities?... On the other hand, as we get further in that direction, it'll be easier to be a skilled manager. If the prices are less efficient, it should be easier to spot the misvalued securities. There are some self-correcting tendencies built in here.
Finally, Hendrik discusses which assets he personally has in his portfolio, his concerns about inflation, the benefits of Treasury inflation-protected securities ("TIPS"), and the downfall of meme stocks. Plus, he responds to popular criticism about the value of a Master of Business Administration degree...
You not only need to understand the formulas, but you need to overlay judgment and common sense. So I think when people criticize what we teach... it's because sometimes people come out knowing the formulas but not necessarily having the judgment or common sense.
Click here or on the image below to watch the video interview with Hendrik right now. For the full audio episode, click here.
(Additional past episodes are located here.)
The transcript is coming soon.