In 2001, in preparation for a strategic defense summit, an analyst at the Pentagon prepared a rather remarkable memo. Perhaps the expectation was for a lengthy tome outlining the most likely threats, a detailed analysis of strategic capability gaps, or an evaluation of deployment, logistics, and readiness.

But Lin Wells’ memo was a mere single page. It has been de-classified, and you can find it here.

Instead of looking forward, Wells imagines himself as a defense analyst at various points over the prior century. It begins:

If you had been a security policy-maker in the world’s greatest power in 1900, you would have been a Brit, looking warily at your age-old enemy France.

By 1910, you would be allied with France and your enemy would be Germany.

Wells proceeds to time-travel to each subsequent decade, summarizing key perceived imperatives and how they were completely upended shortly thereafter. Some notable examples:

By 1930 […] the defense planning standard said “no war for ten years.” Nine years later World War II had begun.

[In 1960], few people had heard of Vietnam.

By 1980, the Soviets were in Afghanistan […] By 1990, the Soviet Union was within a year of dissolution.

Wells concludes, in his present-day: “All of which is to say that I’m not sure what 2010 will look like, but I’m sure that it will be very little like we expect, so we should plan accordingly.”

The investing world often clings to predictions like a security blanket. Many forecast interest rates, inflation, elections, and earnings—all in the hope of positioning their portfolios for an imagined future. But as Lin Wells reminds us, history rarely cooperates.

Today, we are living through a period of substantial transition, a realignment of the world economic and geopolitical order unseen since World War II. How to invest amid such uncertainty?

For those who haven’t followed the work of finance professor Hendrik Bessembinder, his research is worth reading… if for no other reason than it might help you should you become a contestant on Jeopardy! In a paper published last year entitled Which U.S. Stocks Generated the Highest Long-Term Returns, Bessembinder looks back a century to determine which stocks had the best cumulative returns over various time horizons, including the full period.

Here is the list of U.S. stocks that had the highest annualized returns over a 1-5-year horizon at any point in the last 100 years:

These are seriously impressive returns! But two critical observations courtesy of Bessembinder: (1) the median period in which these outsized returns were achieved was a mere 1.25 years; and (2) among those thirty stocks, only one of them (Biohaven) still exists today. A further observation: a disproportionate number of the above-listed investments achieved their blistering results during the dot-com bubble of the late ‘90s. This chart could have been entitled, “Greatest flashes in the pan.”

By contrast, here is the list of U.S. stocks with the highest cumulative returns over the full ~100 year period of data that Bessembinder had access to:

They share a number of durable traits in common: these companies have generated high returns on capital; they have reinvested wisely; they benefit from competitive advantages that have been sustained over decades; and many have built robust franchises…I suspect you recognize many more of these companies than the prior list. 

As Bessembinder notes, while the cumulative returns are mind-boggling, the annualized returns are quite modest ranging from 11-16% per annum. Most importantly … they’ve survived across the shifting world orders described in Wells’ memo, often by doing “boring” things exceedingly well. As an example, Vulcan Materials, which has returned 39 million percent over 98 years, is a provider of crushed stone and gravel. Hershey makes chocolate. Much of the rest are health care companies, consumer staples, and industrial durables. Only a single technology company makes the list. All but three are still listed today. 

Looking forward, the Lindy Principle is worth pondering: the notion that the longer something has survived, the longer it’s likely to continue surviving. It’s a good bet the humble spoon will outlast TikTok, or that in 100 years more people are likely to read Aesop’s fables vs. today’s New York Times best seller. In investing, this isn’t a guarantee—but it is a useful heuristic. Across our various portfolios, we own several of the companies on Bessembinder’s list. Across the pond, European companies we hold have endured—and thrived—longer and through even more challenging epochs including wars, regime changes, and technological revolutions. The average year of foundation of the holdings in our global equity strategy, for example, was 1928 (as of December 2024). These companies don’t depend on the next geopolitical prediction being correct. Instead, they’re built to last, to adapt, and to compound … usually by, quite simply, selling a good or a service their clients value at a price that more-than-covers the cost of capital by virtue of a competitive advantage, thereby creating wealth. 

Wells’ memo was written in March 2001. Six months later, the world was again upended by the attacks of September 11th, which had a profound impact on U.S. defense priorities over the ensuing decade.

The sands are always shifting, but long-term investment opportunities are ever-present. We’ve said it before, and we’ll say it again: Be balanced, not bold. Strive for resilience, not brilliance. And follow Wells’ timeless advice: prepare, don’t predict.