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Avram Fisher, Founder & Portfolio Manager of Long Cast Advisers, is a former equity analyst at CSFB and BMO covering industrials and business services. He has prior experience in private equity; as a corporate governance analyst; as a writer; reporter and private investigator; and as a lifeguard and busboy (I still clear plates when my kids don't). This blog is an open book of ideas about patient investing and about starting up a small-cap focused RIA. It is part decision-diary, part investment observations and part general musings. Nothing on this blog is a solicitation for business nor a recommendation to buy or sell securities. It is simply a way to organize and share thoughts with an expanding audience of independent, patient and talented small cap investors. www.longcastadvisers.com

Wednesday, February 3, 2016

An Updated More Accurate Take on the Market Cap Distribution of the "Best 30-Stocks over the last 30-Years"

As I acknowledged, my initial analysis of the list of 30-stocks, was pretty weak and based on a methodology that skewed everything downwards.

So I went to the SIBL library and looked at actual market caps from 30-years ago.

Unfortunately, I could not get exactly 30-years ago - the Bloomberg terminals at SIBL are there by the largess of the Bloomberg Corporation (ie they're free) - but there's limited functionality; no Excel add-in, no help, no printing (all things I wish I'd known ahead of time).

Instead there was a lot of "XYZ Equity FA GO"-ing and then scribbling down the market cap as early back as I could get. The earliest back I could get was 1988, though for some companies it was even later. (The full data set that I used is at the bottom of this sheet).  And I still couldn't figure out the Market Cap of the S&P 500 in 1985.

But I took what I could get, adjusted it for inflation using CPI calculator and here are two bites at the summary data, all again supporting why small cap companies can be more interesting for patient investors.

First, a frequency distribution of the companies and their market caps @ 12/31/15 and ~30-years ago, adjusted for inflation ....

# of companiesMarket Caps in buckets
Market CapToday30-yrs ago (inf adj)
like they looked 30-yrs ago30-yrs ago (inf adj)
Under $300M114Under $50M4
$300M-$1B07$50M-$200M7
$1B-$10B136$200M-$500M6
$10B-$100B82$500M-$1B4
Over $100B70Over $1B8


... this frequency distribution alone tells the story.

Almost half were under $300M in today's dollars. Some might argue that 30-years ago, a $300M mkt cap company wasn't small. Well, four of these companies were under $50M in today's dollars, and another seven were between $50M-$200M.

And then here's again some very basic statistical analysis, which shows how small these were relative to the overall market 30-years ago. All of them together made up just 2% of the (estimated size) of the S&P. If I take out Altria (~$48B market cap in today's money), that falls to under 1%. And incidentally, take AAPL out of today's figures and the sum of all the companies relative to the S&P falls to ~6% ...

Calculated 30-Yrs ago
Actual from "awhile ago"
Inflation adjusted
Market Caps ($M) of 30 / 30 StocksToday
min$86$1$5$10
median$14,916$65$194$388
avg$55,203$191$1,423$2,802
max$523,852$1,662$24,100$48,272
sum$1,600,881$5,530$41,261$81,267
~ total market cap of S&P 500$17,500,000$2,000,000$2,000,000$4,000,000
sum as % of S&P 500 market cap9.15%0.28%2.06%2.03%
~S&P 500 price$2,038$212$212$424
max mkt cap as % of S&P mkt cap2.99%0.08%1.21%1.21%

... Obviously, small companies - b/c of the law of large numbers - can compound higher growth rates. And obviously, this whole list that Zweig put together suffers from survivorship bias. For each of these 30 companies there are thousands that no longer exist. I mean, just look at the top-10 companies in the S&P from 1985 for an example of survivorship.

Now I'm officially done with this little OCD moment. Though it's still not completely precise, it's good enough and better still, for the first time in long time, I've found a pretty interesting crop of small-cap companies I'd like to analyze! Will share what I can at a later date here.   

30-yrmarketcapCalculatedActual from Inflation
name% returnCAGRticker12/31/2015 ($M)30-yrs ago"awhile" agoAdjustedDate of M/C
Balchem Corporation107,09926.18BCPC$1,859.0$1.7$5.2$10.5FYE1988
Home Depot Inc67,79524.27HD$169,654.6$249.9$808.8$1,620.0FYE1988
Amgen, Inc.62,85023.96AMGN$121,978.8$193.8$2,437.0$4,386.6FYE1990
Nike Inc42,11122.32NKE$106,548.9$252.4$2,943.0$5,297.4FYE1990
UnitedHealth Group Inc40,50322.16UNH$113,227.3$278.9$71.9$104.3FYE1998
Danaher Corporation39,52622.06DHR$63,147.8$159.4$322.2$467.2FYE1998
Altair39,07022.01NANANANANA
Kansas City Southern37,38421.83KSU$7,593.8$20.3$409.9$821.0FYE1988
Jack Henry & Associates, Inc.36,71621.76JKHY$6,451.1$17.5$12.2$24.4FYE1988
Apple Inc.31,42821.13AAPL$523,852.2$1,661.5$5,453.0$10,922.4FYE1988
Altria Group Inc28,43220.72MO$118,564.0$415.5$24,100.0$48,272.3FYE1988
Paychex, Inc.26,83820.49PAYX$17,451.8$64.8$193.5$387.6FYE1988
HollyFrontier Corp26,24920.4HFC$6,101.7$23.2$130.0$260.4FYE1988
Monster Beverage Corporation25,32320.26MNST$27,594.5$108.5$53.3$77.3FYE1998
Stryker Corporation21,32919.57SYK$37,188.0$173.5$316.2$632.4FYE1988
Expeditors International of Washington20,12719.34EXPD$8,263.7$40.9$87.4$174.8FYE1988
Gentex Corporation19,09519.13GNTX$3,999.7$20.8$30.2$60.4FYE1988
CVB Financial Corp.16,23218.49CVBF$1,566.0$9.6$61.6$123.2FYE1988
Helen of Troy Limited16,05718.45HELE$2,500.5$15.5$65.3$124.8FYE1989
St. Jude Medical, Inc.15,95118.42STJ$14,916.0$92.9$452.2$904.4FYE1988
Medtronic PLC15,82018.39MDT$107,585.0$675.8$1,100.0$2,200.0FYE1988
Raymond James Financial, Inc.14,58818.07RJF$5,997.9$40.8$88.1$159.7FYE1990
Applied Materials, Inc.14,08217.93AMAT$19,452.1$137.2$328.8$657.6FYE1988
Cracker Barrel Old Country Store, Inc.13,91217.88CBRL$3,176.1$22.7$112.9$225.8FYE1988
Graco Inc.13,59317.79GGG$3,861.4$28.2$133.0$266.0FYE1988
SEI Investments Company13,25617.69SEIC$6,182.2$46.3$205.0$410.0FYE1988
Precision Castparts Corp.13,15217.66PCP$32,326.4$243.9$563.6$1,127.2FYE1988
Lowe's Companies, Inc.13,03017.62LOW$65,768.6$500.9$755.8$1,511.6FYE1988
Watsco Inc12,17617.36WSO$3,985.9$32.5$15.5$27.9FYE1990
Dynamic Materials Corporation11,94317.28BOOM$86.0$0.7$5.8$9.7FYE1992
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THIS IS NOT A SOLICITATION FOR BUSINESS OR A RECOMMENDATION TO BUY OR SELL SECURITIES. IT IS MERELY THE RAMBLINGS OF AN OVER TIRED INVESTOR *SNIFF* WORKING ALONE IN HIS OFFICE *VIOLINS PLAYING SAD SONGS OUT OF TUNE * TRYING TO START A BUSINESS AND RAISE MONEY FROM OUTSIDE INVESTORS *A MIME JUST WALKED BY MY OFFICE AND GAVE ME THE FINGER* I CANNOT GUARANTEE THE ACCURACY OF THIS INFORMATION *THERE WASN'T REALLY A MIME IT WAS MY 8 YEAR OLD SON* DO YOUR OWN HOMEWORK.