53% of the time, it worked every time
Morgan Stanley quantifies single-stock concentration risk. Pope memes. TGIF.
Morgan Stanley: Confronting the Concentrated Equity Challenge and Measuring Drawdown Vulnerability (Jan 2025).
This is a great paper full of clear and persuasive charts and graphs. Here are a few of my favorites.
This paper doesn’t mention tax, but single-stock concentration is endemic, and tax is one reason people hold.
From Dec 2014 - Dec 2024, 53% of Russell 1000 stocks experience no "catastrophic loss" (50%+ peak-to-trough drawdown).
But of the 47% that did, ~40% (19% of the total) had not recovered as of Dec 2024.
Even with recovery, temporary catastrophic loss is bad if investors need to sell to raise cash (emergency, home down payment, etc.).
In that case, they'll never recover.
They go on to suggest an Equity Vulnerability Score “for assessing stocks’ relative drawdown risk,” which I’d like to revisit in the future.
But it’s Friday, so let’s do memes…
