The reason the unexcellent stocks beat the excellent stocks and the market? Mean reversion. According to Bannister:[xlviii] In theory, high returns invite new entrants that drive down profitability, while poor returns cause competitors to exit, as well as lead to potential new management or acquisition by a competitor or financial buyer. The excellent stocks lagged because their businesses worsened. The profitability and asset growth trended to the average. The businesses of the unexcellent stocks also worsened but not as much as the excellent stocks. Clayman’s unexcellent stocks beat the
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