1/ Investors Beware of Fools Gold. Similar to Veiled Value stocks, which I discussed in a recent paper, Fools Gold is another group that is causing confusion for investors. 2/ Value Traps come in many forms, but Fool’s Gold are in the cheapest 1/3rd by Price-to-Book but the most expensive 1/3rd by other metrics like Sales, Earnings and Cash Flow. In other words they look cheap only by Price-to-Book standards.

It is very unlikely that the largest companies today will keep up with the market to remain the largest into the future. These Mega Cap names tend to under-perform. This chart is a great visual of what history can teach us about how quickly these names can drift out of favor. Also, here is a look at the number of Top 10 names that have historically drifted from the largest 10 over the next decade. The average in the U.S. has been around 6-7 on average.