Comment by rottencupcakes

> It's this sort of mentality and the prolitferation of passive investing that gives these companies the opportunity to pass the bag.

As opposed to normal people trying to pick winning stocks?

* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

Most stocks suck:

> We study long-run shareholder outcomes for over 64,000 global common stocks during the January 1990 to December 2020 period. We document that the majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the US, 1.41% of firms account for the $US 30.7 trillion in net wealth creation.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251

> Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing four percent of listed companies explain the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills. These results highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447

Further, over ten years, most individual stocks under perform a market index (even more so if stock was initially a top performer):

> […] Since 1926, the median ten-year return on individual U.S. stocks relative to the broad equity market is –7.9%, underperforming by 0.82% per year. For stocks that have been among the top 20% performers over the previous five years, the median ten-year market-adjusted return falls to –17.8%, underperforming by 1.94% per year. Since the end of World War II, the median ten-year market-adjusted return of recent winners has been negative for 93% of the time. The case for diversifying concentrated positions in individual stocks, particularly in recent market winners, is even stronger than most investors realize.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4541122

Even with all these shenanigans, most people are better off sticking with index funds.

“Passive investing” is not the same as “buying anything at any price”. Index funds follow transparent rules and weights. If the company is overvalued, that overvaluation is set by the wider market, not just passive investors.