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To: Jules V who wrote (21954)	4/20/2000 1:59:00 AM
From: sea_biscuit	Read Replies (2) \| Respond to of 25814

The article you quote seems to have a bit more info than the one I saw in Newsweek. For instance, the bit about Merck & Co. That is probably the only part that I disagree with. If Merck dropped from an arbitrary "most admired" list in 1997, so what? We have to evaluate its effectiveness as an investment. Merck had returned 25% annually over the 10-year period 1988-1997. Merck's effective dividend yield on average 1988 cost was a full 10.0% by the end of 1997. Its 10-year dividend growth rate for 1989-1998 is 16%. Merck has increased its dividends for the last 17 consecutive years. Of course, it could still prove to be a poor investment in the future. How do we decide when that has happened? When Merck cuts its cash dividend. It is a somewhat arbitrary, but clear-cut and simple enough criterion for dumping a stock. A similar analysis shows that, of the 50 stocks that were the rage during the "Nifty Fifty" craze of 1970-72, only 15, i.e. 30% of them, could equal or better the averages in the next generation, i.e. 1973-1997 (25 years). Interestingly, none of those 15 were tech stocks. And there were quite a few of them in the list - IBM, TXN, Burroughs, DEC, Polaroid, Xerox. Six of the 15 winners were pharmaceutical companies (there were totally 9 pharmaceuticals in the Nifty Fifty; JNJ was one of the losers -- it just matched the S&P 500 over those 25 years, a direct result of its overvaluation, with a P/E of 57, in 1972). Successful long-term buy-and-hold is no joke. Both growth and value investors have to dump their stocks when they have run their course or else, they will go down along with the stocks. That is what makes Warren Buffett, a true long-term growth investor, such a rarity. And even as the present-day tech-drunk crowd mocks at him, I am sure the old man from Omaha will have the last laugh when all is said and done and the numbers are added up.