Wayne started his Marketocracy portfolio at the end of September 2000 but it was 12 years before I decided to vet him. Over those 12 years, the S&P 500 returned 1.29% a year, while Wayne averaged 11.05%. If you invested $200 a month in the S&P 500 starting in September 2000, after 12 years you would have deposited a total of $29,000 and you would have made a paltry $2,167. Invested in Wayne, you would have made $26,380. This kind of performance creates wealth for clients and that is why I vetted him.
Now, almost 7 years after I made Wayne's portfolio available for clients to invest in, he has now averaged 11.79% a year for more than 18 years while the S&P 500 has averaged 5.87%. That the S&P 500's average annual return increased 4.5x shows you what a strong bull market we've had since 2012. Wayne's average annual return increased as well, but not by as much, indicating a much more consistent performance at a higher level over a long time. As of June 2019, an investor who started putting $200 a month in Wayne's portfolio in September 2000 would have deposited a total of $43,400, and made $89,070. Their account would now be worth $132,470. Invested in the S&P 500, their account would be worth $73,825.
Wayne started his Marketocracy portfolio at about the same time he started his own hedge fund to manage money for high net worth investors and institutions around the globe, including heavy hitters like Millenium Partners and Hyundai Securities. Most professionals are insulted when I ask them to show me proof of their investment skill. But not Wayne. He was happy to explain how his investment approach works.
Wayne is one of the best practitioners of the technical approach to investing that I have ever met. I think it is his use of the latest quant tools that enable him to succeed where so many other technicians have failed. At a time when the market frequently makes big moves on over-hyped headlines, Wayne's unemotional approach to investing has a decided advantage.
I admit that I was skeptical that anyone can make good investments decisions without researching a company's products, competitors, and customers. However, at the end of the day, if the returns are there, I'm willing to listen. Here's what Wayne had to say:
When auto enthusiasts compare two race cars and one of them consistently wins in time trials, they can ask why it did and inquire as to all the details of the engineering; perhaps it was the tires, or the cylinders, or the aerodynamics, or maybe it was the weight that gave it those crucial 3 seconds. But whether or not they can find the specific superiority, they will more likely put their money on the proven winner for the next big race.
Yes, it may make us feel better to “know more” about the relationship between going faster around corners and wider tires, or perhaps it excites us to be able to talk more specifically to our friends about its technical qualities, but these variables do not improve our already established certainty of which car is more likely to win the next race.
In reality, the intricacies of the engine and tire and horsepower combinations are only important to the designers and engineers when trying to build a top performing car, or in terms of stocks, the managers trying to build a top performing company. As for the rest of us, we tend to be results oriented; if the engineers have done a good job, we'll see the numbers play out on the track!
It has taken Wayne 45 years of rigorous empirical research to develop indicators that reveal the internal behavior of stocks, telling him whether a stock does better “handling turns” or “accelerating through straightaways”, and as such, helps him pinpoint its more likely future price movement. He is not always right. But because he has been a lot more right than wrong he has outperformed the S&P 500 for a long time and delivered wealth creating returns for clients.