The Problem with Investment Diversification

Sep 18, 2023 | Finconomics 101, No Bull Economics

Investment Diversification Banner

Every investment advisor and business student knows that portfolio diversification is key to wealth building. Show me an investor who can beat the S&P 500 Index by buying a few handpicked stocks and I will show you a hedge fund manager in the making. However, there is a huge problem with this strategy that no one is talking about.


  • How does Anheuser Busch and Target make such huge marketing miscues that wipe out billions in their market cap and no one gets fired at the top?
  • How do ESG mandates get codified in big corporations without any preceding evidence that they will drive profits? How about evidence that they will not at least drive losses?
  • The simple answer is that the largest publicly traded companies are owned by investment funds that have pooled together funds from individuals that are far, far removed from influencing the operational decisions of the companies in which they are invested in.
  • In other words, there are no shareholders to hold management teams accountable. Instead, management teams and board of directors have become accountable to portfolio managers who don’t have the time or inclination to exercise their delegated authority over their well-diversified investment portfolios that may span hundreds of companies. 
  • Sure, there are a few activist investment managers who will push ESG or other social agendas, but there are precious few who will hold management teams accountable to innovate and drive ROI. We need more of this.    
NoBull’s fantasy stock game which is under development is currently being run internally. Notably, our student intern (John) is leading the pack with 10 stocks that are performing in line with the S&P. We may have a difficult time recruiting him away from the hedge funds. It’s a good thing Wally already has a job with Restaurant Research!!
Stock Fantasy Performance

NoBull Podcast: Beyond Diversification

Marketing NFS Graphic Updated
NoBull Posts Thumbnail
Restaurant Research

Email Sign-up

15 Second Posts

2Q23 Retail Same Store Sales

NoBull’s Retail Same Store Sales Report benchmarks 80+ large consumer retail companies by domestic same store sales including annual (2019 – 2022) and quarterly results (2Q22 to 2Q23).

Walmart Investor Presentation: Inflation Here to Stay

While general merchandise prices are lower y/y, they remain elevated compared to 2 years ago. As Walmart does not believe general merchandise and food (dry grocery) & consumable prices are ever going to completely disinflate, management suggests the need for a country-wide wage increase rebalancing.

Interesting Conversation with Fed Chair Powell

Okay, Powell didn’t actually take our call, but we offer a transcript of a potential discussion between the Fed Chair and John Q. Public. It’s very insightful, so please read on.

Part 3: Analyzing Performance of Low-Income Oriented Retail Companies

We created an index for the financial performance of 5 low-income oriented retail companies to assess the health of this demo. While we recognize that these companies have benefited from the trade-down of higher-income consumers, things look reasonable at least through calendar 2Q23. 

Part 2: Incremental Interest Payments Squeeze Disposable Income

In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.

Part 1: Keeping an Eye on the Consumer’s Top-Line

The consumer’s top-line benefits from a high employment rate, generous raises, and a healthy savings rate which indicates an income surplus.

Teenage Wasteland No More

The American youth (15 – 24-year-old) unemployment rate makes our country look downright productive compared to the rest of the world!

The Fight for Global Manufacturing Gets Personal

Post-covid U.S. exports of goods & services have skyrocketed as American companies have worked hard to onshore their supply chains, providing them with products to sell overseas. Correspondingly, U.S. imports from China have fallen considerably since late 2022 after China’s extended covid lockdowns left their American customers without product to sell.  

China’s Deflation Looks Pretty Good Compared to U.S. Inflation

While the U.S. has been suffering from severe post-covid inflation, China’s prices have been spiraling lower. What’s up with that?

July’s Retail Sales Reveal Changing Consumer Spending Trends

Estimated monthly sales for retail & food services increased +8.4% on an annualized, sequential m/m basis during July 2023. While this looks great & helps explain the Atlanta Fed’s forecast for +5.9% 3Q23 real GDP growth, a closer look at the details reveals ongoing consumer struggles.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company