First Brands Is Missing Some Money

It is helpful, in investing, to be able to amortize a certain amount of work over a lot of capital. If someone offers you an opportunity to invest in a company with an expected return of 30% annualized, that is pretty good, and you might be willing to take the meeting and do some due diligence and sign the contracts and wire the money and do all the intellectual and administrative work to get that return. But if the company is a lemonade stand and your investment is capped at $20, that 30% return will not be very exciting. What you want is an asset with a high expected return and a lot of capacity, one where you can invest millions of dollars, earn 30% of millions of dollars, and get a nice reward for all the work you put into understanding and making the investment.

In the stock market, this works out nicely. The biggest companies are the ones where you can most easily put capital to work; you can buy a billion dollars of Nvidia stock without too much trouble. And the biggest companies are also in some intuitive sense the most valuable ones, the companies that the market has decided are the best companies, the ones with the highest future earnings and growth potential, the good safe stocks, though of course the market can be wrong.