Are you able to explain how the above probability is calculated
Yes.
Tough challenge...
Goes a little like this.
2,000 investors arrive at an ASF convention.
There is an urn at the front containing identically shaped and weighted balls (think like bingo) each with stock tickers and returns for the FY15 year, inclusive of dividends, written on them. Each of these tickers was a stock which was a member of the ASX 200 and been around for the full year. Hence only there are slightly less than 200 balls are in the urn.
Each investor takes a turn to select 8 balls from the urn whilst blindfolded. The straight average of these returns is taken. The investors are ranked on a league table.
Of these investors, only about 10 will have delivered a return higher than what Craft has reported for FY14/15.
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The above is for a single year only. It becomes progressively more uncommon as more years of outsized returns are achieved. For example, and Craft has made no claims of this particular outcome, if this kind of result was achieved on a per annum basis for just two consecutive years, were we to line up the crowd attendance at the AFL Grand Final today (~100k), only about 3 to 10 of the spectators would be able to generate such a result (per annum, over the full two year period). Craft has produced outstanding returns relative to what has been available in the market on a fully invested, long only, unlevered, Australian equity universe over long period of time.
The use of 8 stocks and equally weighted is a way of approximating a portfolio with 10-15 stocks held with some concentration into a smaller number. If this number were concentrated even further to 6 (roughly meaning that there may be 15+ names in a portfolio, but 6 totally dominate), the number of people producing the back to back outcome above would be around 25-30, just to give you a sense of how important this assumption is to the picture.
Everything else is just assuming full investment with no leverage and a one year holding period, after which a new selection of X stocks is made. It is even harder to achieve this outcome if your holding period is constrained to be longer.