Investments: How Losers Turn Winners

Success is a greasy pole. It is tough to go up, tougher still to stay up there when rivals are aiming for the same pole positions.

So, if you are an investor, would you be better off investing in the leaders of today or the laggards? A research study by Ambit Capital comes to this counter-intuitive conclusion: There is a greater probability of today’s leaders sliding over five years than of laggards remaining laggards over the same period.

Looking at companies in the BSE 500, Ambit found that only 15 percent of leaders on an average stayed leaders over a five-year period; but among laggards, 34 percent rose to become leaders in 5 years. And 25 percent of today’s leaders could become laggards in year 5. The probability of laggards staying laggards all through is an average 18 percent. The Ambit study covered five five-year rolling periods to come to these conclusions.

The conclusion: You may be better off investing in some of the laggards, since, as Avis said, the laggards try harder.