For a year and a half, the flashy stocks won by a mile. The S&P 500's jumpiest stocks beat its calmest ones by 121 percentage points between last April's low and the end of September. Then October came. Over the past four weeks the calm group is ahead by 13 points. Spencer Jakab of the Journal's Heard on the Street calls them boring. We call them the part of the portfolio that lets you sleep.
The standouts are names nobody brags about at parties. Berkshire Hathaway (BRK.B). Chevron (CVX). Procter & Gamble (PG). Costco (COST). Duke Energy (DUK) and Aflac (AFL) made the list too. The Dividend Aristocrats and the Pure Value baskets had a strong month after lagging. Jakab's chart, as of Tuesday, Oct. 27, shows consumer staples, low-volatility and dividend stocks up for October. The high-beta baskets, full of stocks that swing more than the market, are down. So are momentum and pure growth.
Jakab points to history. When a market scare clears up fast, investors tend to go big on risk for a while. That happened after the 1998 rescue of the hedge fund Long-Term Capital Management, and again after the Covid panic of 2020. Both times the risk party ran about 20 months before the dull names came back. Fund managers who studied the "Low Beta Anomaly" found whole decades that favored boring stocks, the 1930s, the 1970s and the 2000s. Jakab's example is 1998 through 2003. The calmest tenth of U.S. stocks earned the most over that stretch, even with the tech boom that ran to March 2000. There's a catch. Those were hard decades to own any stocks. Boring won by losing less.
Thursday showed how it works
Thursday, Oct. 29 was a live demonstration. Alphabet fell 13% and the S&P 500 slipped 0.30%, by Friday's Journal. Yet on the New York Stock Exchange, 1,914 stocks rose and 782 fell. The Russell 2000 of smaller companies gained 1.01%. The index looked weak mostly because a few of its biggest names were. Most stocks on the Big Board went up. That's what a calm half does on a loud day.
Our read
This is Investments and Risk, IN04, with a bit of Behavioral. Jakab makes no promise that boring stocks keep winning next month, and neither do we. What the history shows is simpler. A portfolio with a calm half is one you can keep holding through a scare. Jakab notes the market came back in the end, and staying invested paid. That's a lot easier when half your holdings aren't falling 13% in a day. The desk holds Berkshire in 22 books, Chevron in 37, Costco in 20 and Procter & Gamble in 27, all at weight. The equal-weight S&P 500 fund (RSP) is in 9. Nothing added, nothing trimmed. Equal weight gives every company the same slice, so one giant's bad day moves the fund far less.
For your own plan, the thing this story touches is the mix inside your stock funds. Pull up your 401(k)'s biggest fund this week and look at its top ten holdings. If most of them are the same few tech giants, a lot of your "diversified" fund rides on a handful of names. You don't need to sell anything. Many plans hold something dull on purpose, an equal-weight fund, a dividend fund or a staples sleeve, so the whole bag doesn't move as one. An umbrella is easiest to buy before it rains. If you'd like help sizing the dull half, bring it to your next review.