Kendall, I think these are the stocks you're looking for.
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smartmoney.com
THE 10 STOCKS FOR THE NEXT DECADE ? DECEMBER 1999
THOUGH MANY HAVE tried, no one in human history has yet demonstrated an ability to foretell the future ? something, we venture, that will remain unaltered for the next millennium.
We have long believed that the best guide to the future is not a crystal ball, but something much more concrete: the past. For some truths, whether found in the Bible, in Shakespeare or in Einstein, endure through the ages. In the world of investing, companies thrive and their investors prosper for myriad reasons, most of them unpredictable. But certain qualities do emerge with surprising consistency.
Company Price as of
10/22/99 Curr. Price* % Change Sector
Inktomi
(INKT) 103.06 171.06 66% Technology
Red Hat
(RHAT) 75.19 252.88 236% Technology
Scientific-Atlanta
(SFA) 54.94 54.69 0% Technology
America Online
(AOL) 60.19 85.00 41% Technology
Broadcom
(BRCM) 113.25 225.31 99% Communications
Nokia
(NOK) 105.13 168.50 60% Communications
Nortel Networks
(NT) 55.25 90.44 64% Communications
MCI WorldCom
(WCOM) 73.63 80.06 9% Communications
Monsanto
(MTC) 39.50 41.75 6% Health Care
Citigroup
(C) 48.19 54.50 13% Financial Services
Average % Change 59%
* as of 12/17/1999 - Price delayed by at least 20 minutes.
Source: Zacks Research Wizard
With the benefit of hindsight, it's clear that many of the most successful companies stake their claims in industries with remarkable growth trajectories, capitalizing on visible trends that are still in their infancy. These companies employ leaders with a clear vision for the future, the ability to realize that future through execution and an unshakable conviction in and dedication to their vision even in the face of widespread skepticism ? particularly from stock market analysts and self-proclaimed experts. And they don't lose sight of what should seem obvious but often isn't: that these very qualities must be channeled into efforts that generate earnings and enhance shareholder value. Too many visions have not been fully realized ? Motorola's lofty but failed Iridium satellite venture comes to mind ? because companies have lost sight of that simple but enduring principle.
Examples of recent success stories abound: Bill Gates and Microsoft, Sam Walton and Wal-Mart Stores, Scott McNealy and Sun Microsystems, Andrew Grove and Intel, Michael Dell and Dell Computer. Over the years we've recommended all of these companies to investors, even after their success was obvious, and shareholders have prospered. In each case, qualities necessary for enduring success ? growth potential, vision, conviction, strong execution and dedication to shareholder value ? were there. At SmartMoney, we believe these qualities can be assessed now to predict, though never guarantee, future rewards.
Nearly eight years ago, in the shadow of the '90-'91 recession, we chose our "10 Stocks for the '90s" in the debut issue of SmartMoney magazine. Our optimism about stocks then was rooted in several long-term global developments: the collapse of Soviet communism and the end of the Cold War, the emergence of vibrant markets in Latin America and Asia, and technological innovation. The path hasn't always been smooth, but these developments have endured, and their impact is felt even more strongly today. One major difference: Optimism about the market is now all but universal, and stock prices are correspondingly high. This puts a premium on selectivity. But history shows that, over the long term, stocks do outperform every other type of investment.
Our approach this time was shaped in part by the results of those "10 Stocks for the '90s," which embraced a more "value"-oriented approach by insisting on below-average price/earnings ratios. We found that the companies in high-growth or consolidating industries ? technology and banking ? did best, while the companies in the then-out-of-favor and slow-growing retail industry trailed.
In today's environment, and with a 10-year-or-greater investment horizon, we looked from the outset for sectors with the highest revenue-growth rates, as compiled by First Call. This year the sectors showing the strongest revenue momentum are technology, consumer cyclicals, health care and communications. (We discarded consumer cyclicals since they are, by definition, highly cyclical and thus less suitable for long-term investors. In their place we added financial services, whose growth is tracked not by revenue but by income. We felt the sector was simply too important to ignore.)
We expected that share prices for companies in our favored industries would be high, based on conventional measures, and many are. Yet we were encouraged, albeit somewhat surprised, to discover that sector analyst Elaine Garzarelli recently ranked technology, telecommunications and banking as "undervalued" by historical norms, in part because of their growth rates. This year's market correction has also brought prices down, which should make our selections even more attractive. Finally, we must emphasize that in our quest for extraordinary instead of simply above-average returns, we have compiled what is by necessity a high-risk portfolio.
-- By James B. Stewart |
