Rob Arnott: Too Big to Succeed

The only sector where the top dog was able to hold its position for the entire period occurred in Energy: Exxon Mobil (and its predecessors, Exxon and Standard Oil of New Jersey) never lost its top dog status. How did it stay on top when the top dogs in other sectors failed in their quest to be top dog? Perhaps it remained a winner because it has always stuck to its core competencies, avoided the combative business practices that got other top dogs in trouble, was content with solid mainstream growth and profit margins, has not risen to the bait when under attack, and kept as low a profile as any top dog possibly could. The firm’s persistence at the top also was aided by the 1999 merger of Exxon and Mobil, which combined the #1 and #2 companies in that sector.

Is There a Political Connection?

The 15 “successful” five-year spans—in which more than half of the 12 sector top dogs were able to turn their sector dominance into superior stock performance—began in 1952, 1968–72, 1982, 1986, 1988, 1990, 1993–97, and 2004. These five-year spans were largely dominated by Eisenhower (first term), Nixon, Reagan, Bush I, Clinton, and, in one isolated case (beginning 2004), Bush II. For the most part, these might be seen as political environments characterized by rolling back regulation and not demonizing success.

The 14 “seriously unsuccessful” five-year spans,5 in which few top dogs (no more than 3 out of 12) were able to turn their sector dominance into superior stock performance, began in 1963–64, 1973–79, 2000–2003, and 2005. These spans were dominated by the administrations of Johnson, Ford, Carter, Bush II (but for one starting year), and Obama (one year only, but it’s a doozie). Each of these administrations is characterized by sharp increases in government spending and regulation.