ROIC Persistence / Compounders
CONFIRMEDBusinesses 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.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 12.9% | 8.9% |
| Return per unit of risk (Sharpe) | 0.84 | 0.65 |
| Worst fall (max drawdown) | -43.3% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 16.8% a year against 12.4% for the benchmark; Sharpe 0.76 in the training years, 0.97 after.
After 25 bps of trading costs: 12.2% a year. EDGE OVER RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 13.7% | 19.1% |
| 2000s | 5.5% | -2.6% |
| 2010s | 15.8% | 11.6% |
| 2020s | 19.6% | 14.1% |
// 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
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 20:46 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE NOT IN THIS UNIVERSE YET (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE.