View all Services

What's Trending

U.S. election recap: What could GOP policies mean for investors?
"Kamilton": the 2024 election and who tells your story
View all Insights

What's Trending

Annual Outlook 2025: Building on Strength
"Kamilton": the 2024 election and who tells your story
VIEW More ABOUT US

What's Trending

U.S. election recap: What could GOP policies mean for investors?
"Kamilton": the 2024 election and who tells your story
VIEW ALL COVERAGE

What's Trending

The final stretch: Your top 3 U.S. election questions answered
Investing in the themes of the future
Investment Strategy

The Risks & Rewards of a Concentrated Stock Position: Latin America edition

Download the PDF

“While concentrated stock positions can create substantial wealth, there is also a high probability of dramatic losses that have the potential to derail the financial future you had envisioned for you and your family.”

From oil and mining to autos and manufacturing, Latin America’s industries have created great fortunes, but success sometimes comes at a cost. From behemoths like Mexico and Brazil, to cautionary tails like Venezuela, as industries evolve and change, and public policies and administrations come and go, some companies have adapted and thrived, while others have struggled to survive and disappear.

We examined stocks across 7 countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela), and same rule applies for them all: whether these experiences have been positive or negative, consequences have been magnified by the level of concentration held by an investor.

Here are 3 key take aways from the paper:

1. While building a business or holding a concentrated stock position can lead to great wealth, not knowing when to fold can easily destroy it. Over 40% of the stocks that have ever been part of the Russell 3000 suffered some sort of “catastrophic loss”, defined as a 70% price drop from its historical peak with a recovery of less than 60% from the lows. In the UK, the statistic is similar when analyzing the FTSE All-Share Index ex. Investment Trusts from 1986 to 2022. In Asia, between 1992 and 2022, the number of “catastrophic losses” nearly doubles to 76% of stocks listed in both Hong Kong and Singapore. LatAm is the region with the least number of catastrophic losses at 30%, but the number does not account for Venezuela’s political demise nor for hyperinflation in Argentina. Economic realities and political uncertainties in our region raise the risk of holding a concentrated position.

Analysis of the MSCI EM LatAm Index, 1995-2023

Source: FactSet, Bloomberg Finance L.P., MSCI, J.P. Morgan Private Bank. Data as of April 2023.
This table shows an analysis of the MSCI EM LatAm Index between 1995-2023 . • Looking at all sectors, 30% had a catastrophic loss, 26% had negative absolute returns, 51% had Negative Excess Returns Vs Index • For Information Technology, 25% had a catastrophic loss,253% had negative absolute returns, 50% had Negative Excess Returns Vs Index • For Energy, 12% had a catastrophic loss, 6% had negative absolute returns, 29% had Negative Excess Returns Vs Index • For Consumer Discretionary, 53% had a catastrophic loss, 47% had negative absolute returns, 65% had Negative Excess Returns Vs Index • For Health Care, 50% had a catastrophic loss, 30% had negative absolute returns, 40% had Negative Excess Returns Vs Index • For Communication Services, 36% had a catastrophic loss, 30% had negative absolute returns, 68% had Negative Excess Returns Vs Index • For Real Estate, 0% had a catastrophic loss, 13% had negative absolute returns, 38% had Negative Excess Returns Vs Index • For Industrials, 39% had a catastrophic loss, 26% had negative absolute returns, 57% had Negative Excess Returns Vs Index • For Materials , 37% had a catastrophic loss, 22% had negative absolute returns, 52% had Negative Excess Returns Vs Index • For Financials , 21% had a catastrophic loss, 24% had negative absolute returns, 40% had Negative Excess Returns Vs Index • For Consumer Staples , 20% had a catastrophic loss, 22% had negative absolute returns, 47% had Negative Excess Returns Vs Index • For Utilities, 7% had a catastrophic loss, 14% had negative absolute returns, 45% had Negative Excess Returns Vs Index
Source: FactSet, Bloomberg Finance L.P., MSCI, J.P. Morgan Private Bank. Data as of April 2023.
This table shows an analysis of MSCI EM LatAm Index between 1995-2023 • Looking at all sectors, 30% had a catastrophic loss, 26% had negative absolute returns, 51% had Negative Excess Returns Vs Index • Looking at Brazil, 33% experienced catastrophic loss, 29% had negative absolute returns, 49% had negative excess returns vs the index • Looking at Mexico, 33% experienced catastrophic loss, 28% had negative absolute returns, 41% had negative excess returns vs the index • Looking at Argentina, 6% experienced catastrophic loss, 18% had negative absolute returns, 35% had negative excess returns vs the index • Looking at Peru, 39% experienced catastrophic loss, 13% had negative absolute returns, 659% had negative excess returns vs the index • Looking at Columbia, 43% experienced catastrophic loss, 29% had negative absolute returns, 61% had negative excess returns vs the index • Looking at Chile, 22% experienced catastrophic loss, 24% had negative absolute returns, 81% had negative excess returns vs the index • Looking at Venezuela, 22% experienced catastrophic loss, 11% had negative absolute returns, 17% had negative excess returns vs the index
Here’s another visualization. The winners have generated enormous excess returns, but the median stock has underperformed the FTSE All-Share ex-Investment Trusts Index.

Distribution of excess lifetime returns on individual stocks vs. MSCI EM LatAm Index, 1995-2023

Number of stocks

Source: FactSet, J.P. Morgan Private Bank. Data as of April 2023.
This bar chart shows the distribution of excess lifetime returns on individual stocks relative to MSCI EM LatAm Index between 1995 and 2023. The median excess lifetime returns came in at -0.3%, and registered the following frequencies within 10% ranges: • < -70% - 3, • (-70%, -60%) – 0, • (-60%, -50%) – 7 , • (-50%, -40%) – 7. • (-40%, -30%) – 5. • (-30%, -20%) – 22. • (-20%, -10%) – 55, • (-10%, 0%) – 124, • (0%, 10%) – 149, • (10%, 20%) – 38, • (20%, 30%) – 8, • (30%, 40%) – 5, • (40%, 50%) – 0, • (50%, 60%) – 0, • (60%, 70%) – 3, • > 70% - 8

2. Poor management is not always to blame. In fact, our findings show that across all regions, “exogenous” risks (aka situations out of the company’s management control) were the culprits of the sharp stock price decline. Businesses failure to adapt does explain, however, the failure to recover in most cases. In Latin America, we conclude that nearly 70% of the “catastrophic losses” identified were due to exogenous shocks such as politics, macro mistakes, sectoral shifts, regulatory changes or adverse commodity price moves. Corporate strategy, mostly related to over indebtedness, is to blame in a little over 20% of the cases.

 

3. Concentration can lead to massive wealth creation, but unforeseeable events can destroy it. Hence, diversification is key. There are many alternatives to just selling out of the position, with a focus on risk management.

Read the full report to find out more

Download the PDF
The MSCI Emerging Markets (EM) Latin America Index captures large and mid cap representation across 5 Emerging Markets (EM) countries in Latin America. With 88 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

Contact us to discuss how we can help you experience the full possibility of your wealth.

Please tell us about yourself, and our team will contact you. 
*Required Fields

Contact us to discuss how we can help you experience the full possibility of your wealth.

Please tell us about yourself, and our team will contact you. 

Enter your First Name

> or < are not allowed

Only 40 characters allowed

Enter your Last Name

> or < are not allowed

Only 40 characters allowed

Select your country of residence

Enter valid street address

> or < are not allowed

Only 150 characters allowed

Enter your city

> or < are not allowed

Only 35 characters allowed

Select your state

> or < are not allowed

Enter your ZIP code

Please enter a valid zipcode

> or < are not allowed

Only 10 characters allowed

Enter your postal code

Please enter a valid zipcode

> or < are not allowed

Only 10 characters allowed

Enter your country code

Enter your country code

> or < are not allowed

Enter your phone number

Phone number must consist of 10 numbers

Please enter a valid phone number

> or < are not allowed

Only 15 characters allowed

Enter your phone number

Please enter a valid phone number

> or < are not allowed

Only 15 characters allowed

Tell Us More About You

0/1000

Only 1000 characters allowed

> or < are not allowed

Checkbox is not selected

Your Recent History

Important Information

KEY RISKS

This material is for information purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

NON-RELIANCE

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

IMPORTANT INFORMATION ABOUT YOUR INVESTMENTS AND POTENTIAL CONFLICTS OF INTEREST

Conflicts of interest will arise whenever JPMorgan Chase Bank, N.A. or any of its affiliates (together, “J.P. Morgan”) have an actual or perceived economic or other incentive in its management of our clients’ portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product, separately managed account or hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate; (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client’s account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing, recordkeeping or custody) with respect to investment products purchased for a client’s portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account.

Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio's investment objective.

As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as, for example, cash and high-quality fixed income, subject to applicable law and any account-specific considerations.

While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios.

LEGAL ENTITY, BRAND & REGULATORY INFORMATION

In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPM. Products not available in all states.

In Germany, this material is issued by J.P. Morgan SE, with its registered office at Taunustor 1 (TaunusTurm), 60310 Frankfurt am Main, Germany, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB). In Luxembourg, this material is issued by J.P. Morgan SE – Luxembourg Branch, with registered office at European Bank and Business Centre, 6 route de Treves, L-2633, Senningerberg, Luxembourg, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Luxembourg Branch is also supervised by the Commission de Surveillance du Secteur Financier (CSSF); registered under R.C.S Luxembourg B255938. In the United Kingdom, this material is issued by J.P. Morgan SE – London Branch, registered office at 25 Bank Street, Canary Wharf, London E14 5JP, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – London Branch is also supervised by the Financial Conduct Authority and Prudential Regulation Authority. In Spain, this material is distributed by J.P. Morgan SE, Sucursal en España, with registered office at Paseo de la Castellana, 31, 28046 Madrid, Spain, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE, Sucursal en España is also supervised by the Spanish Securities Market Commission (CNMV); registered with Bank of Spain as a branch of J.P. Morgan SE under code 1567. In Italy, this material is distributed by J.P. Morgan SE – Milan Branch, with its registered office at Via Cordusio, n.3, Milan 20123, Italy, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Milan Branch is also supervised by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB); registered with Bank of Italy as a branch of J.P. Morgan SE under code 8076; Milan Chamber of Commerce Registered Number: REA MI 2536325. In the Netherlands, this material is distributed by J.P. Morgan SE – Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1135, 1077 XX, Amsterdam, The Netherlands, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM) in the Netherlands. Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 72610220. In Denmark, this material is distributed by J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39-41, 1560 København V, Denmark, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 29010. In Sweden, this material is distributed by J.P. Morgan SE – Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 11147, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SE. In France, this material is distributed by JPMorgan Chase Bank, N.A.–Paris Branch, registered office at 14,Place Vendome, Paris 75001, France, registered at the Registry of the Commercial Court of Paris under number 712 041 334 and licensed by the Autorité de contrôle prudentiel et de resolution (ACPR) and supervised by the ACPR and the Autorité des Marchés Financiers. In Switzerland, this material is distributed by J.P. Morgan (Suisse) SA, with registered address at rue du Rhône, 35, 1204, Geneva, Switzerland, which is authorised and supervised by the Swiss Financial Market Supervisory Authority (FINMA) as a bank and a securities dealer in Switzerland.

This communication is an advertisement for the purposes of the Markets in Financial Instruments Directive (MIFID II) and the Swiss Financial Services Act (FINSA). Investors should not subscribe for or purchase any financial instruments referred to in this advertisement except on the basis of information contained in any applicable legal documentation, which is or shall be made available in the relevant jurisdictions (as required).

In Hong Kong, this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request. In Singapore, this material is distributed by JPMCB, Singapore branch. JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. For materials which constitute product advertisement under the Securities and Futures Act and the Financial Advisers Act, this advertisement has not been reviewed by the Monetary Authority of Singapore. JPMorgan Chase Bank, N.A., a national banking association chartered under the laws of the United States, and as a body corporate, its shareholder’s liability is limited.

With respect to countries in Latin America, the distribution of this material may be restricted in certain jurisdictions. We may offer and/or sell to you securities or other financial instruments which may not be registered under, and are not the subject of a public offering under, the securities or other financial regulatory laws of your home country. Such securities or instruments are offered and/or sold to you on a private basis only. Any communication by us to you regarding such securities or instruments, including without limitation the delivery of a prospectus, term sheet or other offering document, is not intended by us as an offer to sell or a solicitation of an offer to buy any securities or instruments in any jurisdiction in which such an offer or a solicitation is unlawful. Furthermore, such securities or instruments may be subject to certain regulatory and/or contractual restrictions on subsequent transfer by you, and you are solely responsible for ascertaining and complying with such restrictions. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund´s securities in compliance with the laws of the corresponding jurisdiction.

References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan team.

© 2023 JPMorgan Chase & Co. All rights reserved.

JPMorgan Chase Bank, N.A. (JPMCBNA) (ABN 43 074 112 011/AFS Licence No: 238367) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Material provided by JPMCBNA in Australia is to “wholesale clients” only. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Corporations Act 2001 (Cth). Please inform us if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.

JPMS is a registered foreign company (overseas) (ARBN 109293610) incorporated in Delaware, U.S.A. Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as J.P. Morgan Securities LLC (JPMS), to hold an Australian Financial Services Licence (AFSL), unless an exemption applies. JPMS is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (Cth) (Act) in respect of financial services it provides to you, and is regulated by the SEC, FINRA and CFTC under US laws, which differ from Australian laws. Material provided by JPMS in Australia is to “wholesale clients” only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Act. Please inform us immediately if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.

This material has not been prepared specifically for Australian investors. It:

  • may contain references to dollar amounts which are not Australian dollars;
  • may contain financial information which is not prepared in accordance with Australian law or practices;
  • may not address risks associated with investment in foreign currency denominated investments; and
  • does not address Australian tax issues.

LEARN MORE About Our Firm and Investment Professionals Through FINRA BrokerCheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products. 

 

JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

 

Please read the Legal Disclaimer for key important J.P. Morgan Private Bank information in conjunction with these pages.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC.

Not a commitment to lend. All extensions of credit are subject to credit approval.

Equal Housing Lender Icon