Grantham and his team's 1999 predictions for performance by asset class were beyond remarkable. In fact, the probability of randomly picking asset class performance with GMO's degree of accuracy was 1 in 550,000.
Not only the order of the returns was spot on, but the absolute performance by asset class was prescient.
Importantly, Graham also shared their current outlook - this time it's for the coming 7 years instead of 10. Chalk that up to in-house discussions of how accurate they can be based on different time horizons.
For the upcoming 7 years, Grantham sees the S&P500 gaining about 1.3%, but a much higher 6.8% for U.S High Quality stocks, for the following reasons:
Anyone can participate with Grantham in his pursuit of high quality stocks, simply by owning their low-cost GQETX fund. A look at the top holdings shows that they are VERY similar to the DJIA industrials. Their strategy is similar to my own -->> buying excellent companies that have a Free Cash Flow Yield that is too far above their cost of capital, discussed in my 2010 outlook along with my DJIA price target.
His top ten Quality Names:
Copyright 2010 AlphaNinja