Mr Lipper,

I suppose I found the premise of your post a bit confusing. For clarification, does stubbornness = opportunity cost? And if opportunity cost is measured as relative underperformance, then how could you know this relative underperformance is what the future held? Can you ever know ex-ante?

Maybe the recent languishing Clipper Fund fits your thesis. Over the historical 5-years ending yesterday it has underperformed its benchmark, the S&P 500, by 115 bps. It's turnover is ~35% which is low-ish and its absolute return over that period has been about 15% p.a. Chris Davis would also tell you he owns a basket of businesses growing their true worth even though the market may not be pricing it correctly. He would also probably quote Ben Graham to: "Price is what you pay, value is what you get." I think the need to do something for the sake of keeping up is a function of short-termism not stubbornness.

However, and I am making some generalization that may not specifically pertain to the Clipper Fund, but what if investors, buying a Large Cap US fund go in expected a p.a. return of 10% to basically match the nominal long-term return of the US market? Well, then the investors, over the last five years, got more than they expected and are ahead of their needs. I would then say these investors have experienced no opportunity cost as they got what they wanted and more and the Clipper Fund's relative underperformance to the S&P 500 doesn't quite matter.

Nevertheless, I think it sounds like you are mostly commenting on the investment style cycle. I would also differentiate the two main styles as value(buy what's cheaper than its worth - downside protection) and momentum(buy what's recently gone up - upside capture). I would also argue that value is bit out of style and thus out of sync with the overall market. Currently the momentum investors are being rewarded in this up market and value, as of late, has not. Since I have my own tendencies/stubbornness, I try to correct via diversification of style. So, what is the solution to preventing my personal opportunity cost or preventing from missing out? I hold a little of both - all the time through all market cycles.