The ‘Nifty Fifty’ was the moniker for a set of popular blue-chip US stocks in the 60s and 70s. They were widely regarded as high quality businesses whose growth prospects were so solid that they could be bought and held forever. Well they were until their subsequent crash and underperformance in the late 70s and early 80s. After that, with the benefit of hindsight, the conventional wisdom became that they were an example of a speculative bubble.

I’ve decided to have a look back to see what lessons there are from this experience that can be applied to the current market environment. This has been prompted by some recent commentary. Back in December, Neil Woodford likened the current market environment to the market environment when the Nifty Fifty ‘bubble’ burst, prompting him to warn in no uncertain terms of the impending doom for those holding high quality ‘bond-proxies’. More recently, I’ve read another blog post, which looked at the performance of a few Nifty Fifty constituents since the height of the bubble and found that they didn’t actually underperform over the long term despite the high prices prevailing at the time. Intrigued by this apparent conflict in perspectives, I’ve decided to have a look myself… Continue reading →