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A Stock Picker's Market

As the next technological revolution unfolds and causes wealth creation to become concentrated in fewer holdings, does active management make more sense?

Some investors favor passive equity investing where diversification and low turnover are prime features. But as the next technological revolution unfolds and causes wealth creation to become concentrated in fewer holdings, does active management make more sense?

Percent of U.S. Public Companies Creating or Destroying Shareholder Wealth

  • Over their lifetimes, the majority of U.S. common stocks have destroyed shareholder wealth, according to academic research. However, we believe that the overall U.S. stock market in aggregate increased shareholder wealth, which illustrates that wealth creation is concentrated among select common stock.

  • The concentration of wealth creation has intensified. From 1926 to 1995, 0.50% of public companies accounted for a quarter of wealth creation, but since 1995, just 0.29% of firms have done so.

  • Clearly, not all equities are good investments, which in our view underscores the importance of skilled active managers who can seek companies with strong long-term fundamentals.

*Shareholder wealth is the increase/decrease in the wealth earned by a company’s shareholders above/below that which would have been earned in the one-month Treasury bill.


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The views expressed are the views of Fred Alger Management, LLC as of December 2021. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by Fred Alger Management, LLC. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund and ETF shares.

​ Risk Disclosure: Investing in the stock market involves certain risks and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Technology companies may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness such as COVID-19 or other public health issues, recessions, or other events could have a significant impact on investments.

​ Fred Alger & Company, LLC 100 Pearl Street, New York, NY 10004 / www.alger.com
​ 800.305.8547 (Retail) / 800.223.3810 (Institutional)