A landmark analysis by Arizona State University’s Prof. Hendrik Bessembinder examined 25,332 U.S. public companies from 1926 to 2006 and revealed a striking truth: 96% (24,240 firms) generated no net value for markets. Just 4% (1,092 stocks) created all aggregate wealth, with a mere 0.3% (90 stocks) accounting for half of total market gains. This underscores a critical reality: exceptional investment opportunities are rarer than intuition suggests. Value investing, therefore, demands focusing on truly elite companies—buying them at reasonable prices and holding long-term. The better the business, the more rational the entry price, and the longer the time horizon, the greater the compounded returns. This forms the bedrock of the Robert Zhang Global 100 Stock Index.
In The Little Book That Beats the Market, Joel Greenblatt introduced a two-part framework:
By targeting companies with both high ROC (indicating operational excellence) and high EY (signaling undervaluation), his hedge fund achieved 40% annualized returns over two decades. Applied to China’s A-share market (May 2005–present), this strategy delivered 19% annualized returns—doubling the CSI 300’s 9% and Shanghai Composite’s 6%. At its core, this echoes the EVA (Economic Value Added) concept: profits are only “real” when ROIC > WACC (Weighted Average Cost of Capital). Many profitable-seeming firms actually destroy value once equity costs are factored in; only those exceeding WACC create economic profits—the “physics” of investing.
Superior investments often exhibit distinct financial profiles:
Three Highs:
Three Lows:
PE/PB Ratios: Indicating undervaluation relative to earnings/book value.
Dilutive Actions: Low likelihood of issuing cheap equity, protecting existing shareholders.
This framework aligns seamlessly with EVA, ensuring focus on companies that truly generate economic value, not just accounting profits.
Legendary fund manager Bill Miller aimed to build a 20–40 stock ETF outperforming the S&P 500, holding positions for years. While his index focused solely on U.S. markets, it validated the thesis that concentrated, high-quality portfolios can beat benchmarks—mirroring the Robert Zhang approach. Our methodology refines this by:
Incorporating global markets (not just the U.S.).
Adding qualitative filters: avoiding sectors like banks, where balance sheets may obscure systemic risks (e.g., hidden non-performing loans).
Objective: Create a semi-annually rebalanced, $10B simulated index of the world’s top 100 companies, blending fundamental rigor with quantitative discipline.
Selection Criteria:
First-class business model with durable competitive moats.
Exceptional corporate culture focused on long-term value.
Sustained EVA generation (ROIC > WACC).
Massive market opportunities for growth.
Reasonable valuation (not overpriced relative to future cash flows).
Advantage: Ranks companies globally on both capital efficiency and affordability—a unique fusion of Warren Buffett’s qualitative insights and Greenblatt’s quantitative rigor.
30 Sample Constituents (out of 100):
China/Hong Kong: Tencent (0700), Kweichow Moutai, Wuliangye, Yangtze Power, Pien Tze Huang, China Merchants Bank, Netease, Alibaba, Pinduoduo, JD, HKEX
USA: Apple, Google (Alphabet), Amazon, Berkshire Hathaway, Meta (Facebook), UnitedHealth (UNH), Disney, Microsoft, Visa, Mastercard, Moody’s (MCO), UPS, Walmart (WMT), Costco (COST), Philip Morris (PM), Abbott (ABT), Tesla, Salesforce (CRM), Nike (NKE)
Conclusion
The Global 100 Index rejects the myth of “diversification for diversification’s sake,” instead focusing on a concentrated portfolio of proven value creators. By combining academic rigor (Bessembinder’s rarity of excellence), quantitative precision (Greenblatt’s formula), and qualitative wisdom (culture, moats, valuation), it aims to outperform major indices—CSI 300, Hang Seng, S&P 500, Nasdaq—over the long term. In an era of market noise, this approach returns to first principles: own the best businesses, pay fair prices, and let time work in your favor.
