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The research in Global Outperformers initially set out to be an internal paper where the Jenga team wanted to understand what drives outperformance in public equity markets.
We soon realised outperformers come in different shapes, sizes, countries and industries and decided to write this book to share what we learnt from studying over 400+ companies that returned 1,000% in 10 years.
Table of Contents
Introduction
Research Framework
Factor Analysis
Outperformance – The geographical view
Outperformance – The industry lens
Ten lessons on outperformers
Appendix
Executive Summary
Since the creation of the first modern stock market in 1611, economies have developed marketplaces to buy, sell and invest in shares of companies that shape how the world functions. Technology and digitalisation meant financial institutions and investors no longer needed a physical space, paper or even their voice to trade these shares. The holding period of shares also decreased; once an eight-year average holding period is now only 5.5 months. Innovative trading strategies, access to leverage, passive investing and algorithms also play a much more significant role within capital markets and have many implications.
Despite the changes and progress we have experienced, some principles remained constant; future earnings and cash flows drive the stock market returns over the long term.
This research aims to examine history to understand what works and drives the best companies, by studying the past decade and assessing the companies that returned more than 1,000%. We then split our analysis into four parts. In the first part, we conducted a factor analysis via a quantitative top-down assessment of the 446 companies that returned more than 1,000%. Critical factors such as profitability, growth, multiples and size were studied to determine if there are contributing qualities or attributes among outperformers. The results in this section can help with your searching and screening process for future outperformers.
The second section examines the global outperformers from a geographical viewpoint. We split the world into 13 economic regions and assessed the macro and micro factors that may have driven their overall returns. Our approach in this section is more qualitative, and we focus on answering the big questions, such as why India has been the best-performing country since the start of the 21st century, why smaller populated countries like Israel and Sweden performed better than more populous countries or why Mexico was missing despite being the 15th largest economy in the world. The goal here is to enrich our perspectives of global investing and capital allocation from a geographic view.
The next chapter, which is the most extensive section, explores global outperformers from an industry lens. We divide the stock market into the 11 sectors (defined by Global Industry Classification Standard GICS) and investigate which sectors did better, why they did and what it means for future global capital allocation. We also included case studies of 26 companies analysing their respective business models, investment cases and lessons to be learnt about investing in outperformers. We added relevant snapshots of their financial statements and other metrics that provide an accounting perspective of investing in outperformers. As you will see, investment ideas came from unlikely areas like emerging market airports, South Korean music labels, Nordic farmers, and Greek energy companies. We explored each of these in the case studies.
Finally, we conclude our research by sharing ten lessons we learned from the overall study. Our goal is to be better investors of the future, not the past, and we review how the information and wisdom gained from the assessment of history can make us better investors for the future.
