Major investment bank reveals: How you are missing out on winning stocks

Michael Strobaek, Global Chief Investment Officer, and Clement Dumont, Portfolio Manager at the Swiss bank Lombard Odier, which specializes in private banking, conducted a weekly review in which they stated:

"Even the most successful investment managers struggle to consistently beat the market."

"For decades, investors in the stock market have been occupied by a seemingly simple question: if professional investment managers dedicate their careers to analyzing companies, why do only a few succeed in consistently beating the market? The answer is not that active investment management is no longer relevant or that managers lack professional ability, but that investment success requires time, discipline, and patience as much as analytical ability.

One of the difficulties is that a very small number of stocks are responsible for a large portion of market returns. A study that examined nearly 30,000 stocks in the US found that over a hundred years, only 1,082 companies generated cumulative profits of $91 trillion for investors, and 46 companies alone are responsible for half of that amount. Therefore, the challenge in stock picking is to identify the individual companies that generate most of the returns and hold them over time.

Even the most successful investment managers do not do this consistently: Warren Buffett lagged behind the S&P 500 in 20 of the last 60 years. In 1999, for example, Berkshire Hathaway lagged behind the market, which was led by technology stocks, but after the dot-com bubble burst, the market lost about 40% within three years, while Berkshire rose by a similar amount. The example illustrates that sometimes it is only with the passage of time that one can assess whether an investment was correct.

We believe in the efficiency of markets and their ability to react quickly to new information, but a quick reaction does not guarantee correct pricing. Geopolitical shocks or technological changes may cause many stocks to move together, without sufficient distinction between strong and weak companies. In such situations, active investment managers can exploit pricing gaps through targeted stock selection - a move that requires time, discipline, and confidence in investment decisions.

For long-term investors, there are more opportunities for stock selection in small-cap companies, emerging markets, and long-term strategies. We believe that investing in broad indices remains an effective basis for a portfolio, but active management can be combined alongside it when gaps arise between stock prices and their value. The combination of the two approaches, in our assessment, can improve the results of an investment portfolio."