Early is good

Private Equity has a simple but effective phrase, ‘fail early’, meaning if something isn’t working you’ll see it straight away. This research topic, based on 1,213 public market equity portfolios demonstrates that what’s true for private equity is also true for public equities.

We show that if it’s poor in the first year it’s highly likely that it will remain poor, a case of failing early and failing late as our private equity cousins would say.

Flipping the focus to what we will call ‘succeed early’, we find that if value is added in the first year then it’s good omen that things will stay good in the subsequent years.

For clients, this research note sets out why we believe first year research alpha is the key to success.

For those who are not familiar with Inalytics research, what follows is going to surprise and challenge some strongly held views particularly on the nature of long term investing.