New study finds that large AND expensive rarely outperform over 5 years

The top corner of the largest and priciest firms faces particularly long odds. We traced each stock's fate upon first entry into the cohort over the subsequent five years. On average, these stocks trailed their regional benchmark by 15 to 20 percentage points over that window. The post-financial-crisis run in U.S. megacaps is an outlier against this record, though most started among the largest stocks but at more moderate valuations — not in the most extreme corner.  Embedded in extreme valuations are expectations that the largest firms will increase earnings by ever-larger absolute amounts — yet evidence on firm life cycles indicates that growth decelerates steadily with size. [https://www.msci.com/research-and-insights/blog-post/tesla-and-the-trillion-dollar-question](https://www.msci.com/research-and-insights/blog-post/tesla-and-the-trillion-dollar-question)