// STUDY RESULT · 1998-01 TO 2026-09

Inspired by Practitioners: ROIC Persistence and Compounders

TRADE-OFF

Businesses that earn high returns on invested capital and can reinvest at those returns compound value. The bet is that returns fade more slowly than the price implies; data show ROIC does revert toward the mean.

How this run differs from the source: One year of ROE stands in for multi-year return on invested capital; nothing tests that it persists.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	13.7%	9.3%
Sharpe ratio	0.79	0.66
Max drawdown	-43.1%	-50.9%

// GROWTH OF $1, LOG SCALE

AMBER: THE STRATEGY · GREY: $SPXTR BUY & HOLD

Out-of-sample (from the split): CAGR 11.9% against 14.0% for the benchmark; Sharpe 0.86 in-sample, 0.70 out-of-sample.

After 25 bps of trading costs: 12.9% a year. WITHIN RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	23.1%	20.9%
2000s	14.2%	-0.8%
2010s	11.8%	14.0%
2020s	13.0%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*25.3%27.2%

199919.7%21.0%

200034.3%-9.1%

200112.6%-11.9%

2002-4.0%-22.1%

200363.1%28.7%

200424.4%10.9%

200514.7%4.9%

200615.2%15.8%

20078.3%5.5%

2008-28.5%-37.0%

200925.0%26.5%

201039.9%15.1%

20112.6%2.1%

2012-2.4%16.0%

201341.6%32.4%

2014-5.2%13.7%

20151.6%1.4%

20167.4%12.0%

201726.3%21.8%

2018-11.2%-4.4%

201936.7%31.5%

202013.0%18.4%

202129.3%28.7%

2022-6.4%-18.1%

20233.2%26.3%

202433.7%25.0%

20259.7%17.9%

2026*7.8%11.8%

Losing years: 2002 (-4.0%), 2008 (-28.5%), 2012 (-2.4%), 2014 (-5.2%), 2018 (-11.2%), 2022 (-6.4%). Each cell: the strategy, then the benchmark below it. * a part year.

// THE IDEA, AS PUBLISHED

Practitioner canon (quality compounders); see Mauboussin on ROIC reversion · 2012

ROIC above about 15% for 5+ years
High reinvestment rate with stable margins
Low turnover; valuation is not the main screen

RUN IT YOURSELF ▸ IN THE LIBRARY

A real computation on the QuantGPT warehouse, walk-forward. A study across the whole market includes only part of the companies that later delisted from 1998 (survivors only before); a study on your own list of tickers is not affected. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-11-07 08:42 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE ONLY PARTLY IN THIS UNIVERSE (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE. PRIVACY