MSCI ACWI companies that generated the highest earnings growth have also led market performance for more than 25 years.
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17.0%
13.5%
9.9%
5.1%
-1.4%
Total Return
This might suggest a strategy for long-term growth investing:
build a portfolio of stocks based on companies with the highest consensus earnings growth forecasts.
High Earnings Growth
Low Earnings Growth
MSCI ACWI performance by historical 5-year earnings growth quintile. Data based on rolling 5-year returns for periods from 12/31/97 to 12/31/23. Source: Jennison, FactSet. Average median annualized returns of stocks over rolling five-year periods, ranked by 5-year historical earnings growth quintiles (1=highest, 5=lowest). Quintiles are rebalanced quarterly. Past performance does not guarantee future results.
For illustrative purposes only. Source: Jennison
MSCI ACWI and S&P 500 Index consensus earnings estimates of companies in quintiles 1 and 2 compared to realized earnings growth five years later. Data from 06/30/05 to 12/31/23. Source: Jennison, FactSet. Past performance does not guarantee future results.
But a small fraction of these companies—less than 21%—have historically lived up to consensus earnings growth expectations.
This can be an opportunity for skilled active investors, who can identify long-term growth companies overlooked by the market.
Year 1
Year 2
Year 3
Year 4
21%
Year 5
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Quintile 1
Quintile 2
Quintiles
