Revisiting “In Search of Excellence: A Portfolio Management Perspective”

Abstract

Using the six financial indicators of “excellent” management described by Thomas Peters & Robert Waterman, Jr. in their 1982 management bestseller ’In Search of Excellence: Lessons from America’s Best-Run Corporations’ the authors screened the reconstructed S&P 500 as it existed at year-end 1971 to 2013, forming two portfolios of stocks June 30 of the following year. One portfolio consisted of stocks in the top one-third of the S&P 500 in all six criteria for the trailing five fiscal years (termed the “Excellent” portfolio) and the other the bottom one-third of all six categories (the “Un-Excellent” portfolio). They found that $1,000 invested at the end of every June beginning 1972 (a total outlay of $41,000) would have appreciated to $1,615,054 as of June 2013 rolled forward in the Un-Excellent portfolios, compared with $502,124 in the Excellent portfolios and $637,048 invested in the S&P 500.

TOPICS: Fundamental equity analysis, equity portfolio management