Why We Are Underperforming in Core Growth

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“The stock market is designed to transfer money from the active to the patient.” - Warren Buffett

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Why we are underperforming in Core Growth.

Do we own the right companies? It seems so.

We own:

·      Nvidia

·      Apple

·      Alphabet [Google]

·      Amazon

·      Meta [Facebook]

These five companies comprise five of the Fab 7. We do not own Microsoft or Tesla.

The obvious question is: If we own the stocks that are driving the stock market, why are we not performing better?

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I wrote about concentration in the S&P 500 a few weeks back citing historical data regarding the increasing focus on fewer stocks. About twenty years ago, the 10 largest companies in the S&P 500 contributed about 20% of the index performance.  Today, the three largest contribute that same 20% of performance. When combined with the next seven largest companies they contribute about 40% of the performance for the S&P 500. In other words, 2% of the stocks in the S&P 500 are contributing about 40% of the return. 

Another way of looking at it is: If we owned only the other 490 stocks in the S&P 500, performance would have been reduced by about 40%. 

I want to be clear: We are not making excuses for having a poor year in 2025 in our Core Growth Strategy.

Our goal here is to explain why it happened.

I believe you all understand that as the market narrows in terms of fewer stocks driving overall performance, investors must own those same stocks as a growing percentage of their total holdings if they are to outperform the market.  Just owning them is not enough.  Owning them in larger amounts vs. everything else becomes imperative.  To perform, one must buy them or underperform.

Yes, we did own the “right” stocks, but we needed to own more of them. We limit the position in all stocks we hold to 5% of your portfolio.  Let’s use Nvidia as an example.  As Nvidia went up in value, we sold shares and reinvested the money in other good companies that were lagging.  But as you know, the price of Nvidia continued to rise as we sold to add to laggards.  That was not anything new.  It is what we routinely do as we have managed risk since we started the strategy in 1998.

It is called risk management.  For us to have fully participated in the market last year, we would have had to compromise risk management by permitting fewer companies to comprise a larger percentage of your holdings.  Yes, our returns would have been much better if we had not managed concentration risk, but the result would have been most of your investments would have been in just a few AI and AI influenced stocks.

We manage your investments in Core Growth for the long term and not to “beat” the market in any given period.

Our performance in Core Growth Equity has been built over 27 years.  We routinely did better than the S&P 500, and when we did have off years, we recovered.

·      We mitigate concentration risk.

·      We accept that mitigating risk during periods of narrow leadership causes underperformance.

·      Over full cycles our strategy has protected and compounded your capital.

Please take a minute to review the following charts showing Core Growth appreciation over the years vs. the S&P 500. As you can see from the second chart, 2025 was not a good year. Only time will tell us if mitigating risk was wise. History lessons are on our side.

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Kevin and I would be pleased to speak to you about your investment performance.  Do not hesitate to request a personal appointment or telephone meeting or Zoom Call.

 Thank you for your patience and trust over the years.

 Sincerely,

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Tom Curran

Founder & Co-CEO

Curran Wealth Management