Writing on behalf of Credit Suisse a year ago, Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School observed the positive effect seen among 'seasoned' British companies as compared to their junior peers.
If you define seasoning as time elapsed from IPO, the older the company, the better it does. Looking at British stocks 1980-2014, companies with 20 years' seasoning returned 61 pounds for every pound invested at the start. Companies with eight to 20 years' seasoning returned 49 pounds, those with four to seven years under their belts only 33 and those with three or less just 20.
This is striking in that it covers a period in which not just the British but the global economy has been revolutionized by technological change. How it could be that most of that benefit would go to frankly geriatric companies is hard to fathom.
Surely there is an element of over-enthusiasm among investors for the new new thing, leading them to overpay, and as in 1999 and 2000, fuel a bubble.
It is also true that much of the economic benefit of a technological revolution does not flow to those who, at first glance, appear to be the winners. Take the development of the Erie Canal, which for a brief time after it opened in 1825 revolutionized transport in the U.S. Not only was the canal quickly made redundant by a newer technology, railroads, but even the early winners of its impact didn't have much time to enjoy its effect.
Shortly after the canal opened, farmland in Ohio boomed in price as grain could suddenly be much more cheaply transported to markets on the East Coast and in Europe. No sooner did Ohio farmers count their gains than huge new supply flowed in from farms further west, which were only economic now that transport was cheaper. Grain prices fell and investors in Ohio farmland were hurt and many ruined.
Contrast this to Tiffany & Co, founded in 1830 and delivering double the performance of the S&P 500 over the past decade.
It may be that the very old got that way for a reason. (At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.