Avoiding the Trip to Iowa
Two Mondays ago, on travel to Iowa (I go there a lot - why you ask? See the answer at the bottom of this post), USA Today featured a full page on the best performing stocks over the last twenty five years. I was stunned by the variety of the companies and the returns. (the data was based on Ned Davis Research analysis of stocks from September 15, 1982 through April 5, 2007).
Had you been wise enough to invest $10,000 in any one of the following stocks in 1982, here's what you'd be worth today (percentages are annual return on investment):
- Franklin Resources (mutual fund manager) $6,432,000, 29.5%;
- Danaher (industrial tools) $4,801,300, 28.0%;
- Eaton Vance (mutual fund manager) $3,854,400, 26.9%;
- UnitedHealth (medical insurance) $3,777,200, 26.8%;
- Cisco (network equipment) $3,373,200, 26.2%;
- International Game Technology (casino equipment) $3,353,600, 26.2%;
- Biomet (medical devices) $3,063,100, 25.7%;
- Microsoft (software) $2,936,600, 25.5%;
- Best Buy (consumer electronics) $2,880,300, 25.4%;
- Oracle (software) $2,863,500, 25.4%;
- Stryker (medical artificial joints) $2,548,300, 24.8%;
- Countrywide (mortgages) $2,426,000, 24.6%;
- Expeditors International (freight) $2,396,000, 24.5%;
- Home Depot (retail home improvement) $2,394,500, 24.5%;
- Dell (computers) $2,314,800, 24.3%;
- Robert Half (staffing) $2,127,000, 23.9%;
- Credo Petroleum (gas driller) $2,028,000, 23.7%
- Adobe Systems (software) $2,008,900, 23.6%;
- Precision Castparts (jet engine castings) $1,953,700, 23.5%;
- Berkshire Hathaway (Warren Buffett companies) $1,952,400, 23.5%;
- Smithfield Foods (pork food products) $1,951,400, 23.5%;
- Paxar (apparel) $1,902,300, 23.4%;
- Time Warner (media and entertainment) $1,825,800, 23.2%;
- Paychex (business services) $1,802,000, 23.1%;
- Harley-Davidson (motorcycles) $1,790,800, 23.1%
How can you pick the next Microsoft or Cisco? Start by examining the industries that are anticipated to grow like the profile of a hockey stick - that is large addressable markets, preferably in the early stage of maturity. And then look for companies with great management teams who emphasize customer focus, quality product or service, and stong financial controls (cash is king - just believe in Warren Buffett's model). Here are a dozen (a baker's dozen) industries to look for the next big thing: energy, entertainment, education, healthcare, medical devices, internet, consumer electronics, water, environment, finance, bio technology, security, and food.
I particularly expect great opportunities lie ahead in proteins and genetics. The next two decades will be to proteins and genetics what the last two decades were to computers and software.
I also expect vast wealth will be made in alternative energies, but not until the second half of the next twenty five years.
My third favorite area is finance - money always makes money.
Get ready for an incredible ride!
Oh, and why do I go to Iowa so frequently? It's simple - I did not discipline myself 25 years ago and invest. And so I must work. That ugly four-letter word.
Take control. Invest. Do it now. Pay yourself first. Never miss a payday. And when you're 50, you won't have to go to Iowa like me.
Pierre Cutler
The Sacramento Executive
Comments
great advice, invest early and often and you'll be rewarded by compounding interest
Posted by: Geoff | May 3, 2007 11:15 AM