How to Win the Loser's Game

 

“How good do you think your chances are of guessing the best-performing stock of the next 100 years? A fascinating study shows they're very, very low.

 

Sticking only with the U.S. and just plucking a ticker symbol out of a hat would put the probability of picking the coming century's champ at barely 0.02%. But that's too generous.

 

The winning stock might not exist yet: Today's superstars like Nvidia, Apple, Microsoft and leading consumer brands like Nike, McDonald's and Walmart weren't even a twinkle in their founders' eyes in 1926.

 

Ah, but you wouldn't be picking randomly. Avoiding companies in mature, competitive industries seems like a sensible first step. And obviously you'd steer clear of one whose products slowly killed their best customers or that wasn't allowed to advertise.

 

But then you'd have missed the best-performing stock by far of the past century according to Arizona State University professor Hendrik Bessembinder. One dollar invested 100 years ago in cigarette maker Philip Morris (now Altria) turned into $4.42 million by the end of last year, including dividends and spinoffs.

 

No. 2 was Vulcan Materials, which operates rock quarries. And No. 3 was Kansas City Southern, a railroad. What about Tesla, Amazon or Netflix? They've had great annualized returns, but not for enough years.

 

Even more surprising? Most stocks were losers. The median buy-and-hold return of nearly 30,000 stocks in Bessembinder's study was negative 6.9%. Almost 6 in 10 reduced wealth by trailing short-term Treasury bills.

 

There's a takeaway for investors today, and it isn't to pick the most boring industries (though that seems to have worked well): It's how few stocks make most of the money. Just 46 produced half of the net wealth. All of it was from fewer than 4% of stocks.

 

Don't despair, though. While picking a big winner is like finding a proverbial needle in a haystack, it's much easier than in 1926.

 

Now that index funds exist, it also costs hardly anything.

 

The passive strategy that guarantees you'll own today's Philip Morris is practically gospel: Burton Malkiel's bestseller "A Random Walk Down Wall Street" and Charles Ellis's "Winning the Loser's Game" both were published more than 50 years ago.

 

The secret to owning a winner is owning all the losers, too.” [1]

 

1. How to Win the Loser's Game. Jakab, Spencer.  Wall Street Journal, Eastern edition; New York, N.Y.. 24 Mar 2026: B11.