From: Adam Rifkin -4K (adam@XeNT.ics.uci.edu)
Date: Mon May 01 2000 - 20:25:10 PDT
I wrote:
> The two top-performing stocks of the 1990s were AOL and CMGI,
> neither of which was publicly trading in 1990.
Jeff responded:
> There are lots of ways to calculate this, but I have CMGI at #5 with
> value appreciation of >57,000% during the 90s. The top four --- can't
> recall the order --- are DELL, CSCO, AOL, and EMC.
Jon Markman is my source:
http://moneycentral.msn.com/articles/invest/models/4979.asp
> Through Dec. 27 [1999], Dell was up 89,820% for the decade, CMGI was up
> 85,683% and America Online was up 79,520%. Anything can happen in the
> last two days, so I'll update you on the photo finish early next year.
> (The next-nearest contenders are EMC up 66,852% for the decade through
> Dec. 27, and Cisco Systems, up 61,916%. By contrast, the S&P 500 is up
> 299% since Jan. 1, 1990 and the Nasdaq 100 is up 1,464%.)
If I'm remembering correctly, AOL and CMGI went up in the last week of
December 1999, and DELL went down. I can't find the final numbers on
the MSN site, though. Oh well, no matter. If you held any of those
five stocks in the 1990s, chances are you did real good. And, in the
article I include below, we see that these percentages are much higher
than they were even at the end of 1998.
I do wonder what the top stocks of the next decade will be. I think I
had heard of Dell and Cisco by 1990, so I wonder if two of the top five
stocks of the next decade are companies I know right now. Or who knows,
maybe by the end of 2009 the U.S. will have gotten sick of following the
stock market.
But probably not. As early as December 1998, MSN Investor was trying to
predict "the best stock of the next decade":
http://moneycentral.msn.com/articles/invest/strat/2892.asp
And boy do they have Egghead all over their face...
> THE BEST STOCK OF THE NEXT DECADE WILL BE . . .
>
> Wondering which of today's stocks will skyrocket after 2000? History's
> charts may offer some clues -- and probably will surprise you.
> By Mike Robbins, December 23, 1998
>
> With only one year left in the decade, it is all but certain that Dell
> Computer will be the stock of the '90s. At last count, Dell shares were
> up an astounding 55,000%-plus in less than nine years, easily
> outdistancing all rivals in this decade or any other.
>
> Dell's victory isn't a total surprise. Anyone who's followed the markets
> this decade knows of the computer maker's remarkable success. Dell's
> strategy of building computers on demand and selling directly via mail
> order has given the company a distinct advantage on its competition by
> lowering inventory and sales costs. Besides, Dell is a computer company.
> It's logical that a high-tech company would lead the way in the 1990s.
>
> But high-tech or no, Dell won't be the first company that most of us
> will think of when we remember the past decade. Shouldn't the stock of
> the decade be the company with the greatest product innovation, or at
> least one that leads its sector? Let's face it, Dell might have strong
> management and a winning sales strategy, but there was seemingly little
> to keep other companies from copying the firm's business plan. "Dell's
> not a seminal stock," agrees Laszlo Birinyi, president of Birinyi
> Associates. "There's nothing about Dell that makes it a watershed."
>
> But watershed or no, 55,000% speaks for itself. What of EMC Corp.,
> with its dominant position in mainframe data-storage systems? Up "only"
> 25,000%. Cisco Systems, with its dominant position in Internet
> infrastructure? Up just 22,500%. Software giant Microsoft, up a measly
> 4,900% -- a figure that's surpassed even by America Online, which is up
> 18,000% even though it didn't get started until 1992. The big-chip
> stocks barely rate a mention: Intel is up just 2,300%.
>
> What does this mean for investors in search of next decade's big winner?
> If you ask market analysts to predict the stock of the '00s, you'll hear
> a few young Internet stocks mentioned, as well as some support for
> larger but well-positioned technology companies including Cisco or
> Microsoft. But does history support these predictions, or when it comes
> to picking the biggest winners over decades, are cutting-edge
> technologies overrated?
>
> To find out, we asked Jim O'Shaughnessy, manager of the O'Shaughnessy
> Funds and author of the book "What Works on Wall Street" to screen the
> past half-century of S&P Compustat data to find out which stocks led the
> pack in prior decades. The results were a bit surprising.
>
> Top stocks of decades past
> Decade Rank Stock Price Gain
> 1950s 1 Polaroid (PRD) 8,366%
> 2 Avon (AVP) 3,799%
> 1960s 1 Masco (MAS) 10,177%
> 2 Xerox (XRX) 5,146%
> 1970s 1 Keystone Int. 2,393%
> 2 ChemFirst (CEM) 2,170%
> 1980s 1 Circuit City (CC) 8,265%
> 2 Mark IV (IV) 6,998%
> 1990s 1 Dell (DELL) 55,000%
> 2 EMC (EMC) 25,000%
> Note: Only stocks that were publicly traded throughout
> the decade are included in each decade's standings.
>
> What do past decades' top stocks have in common? Not much, on the
> surface. Certainly they are not all among the companies we think of when
> we think of big stock market returns. In fact, only two of the eight,
> Polaroid in the 1950s, and Xerox in the 1960s, based their stellar
> performances on the sudden success of a breakthrough technology. For
> Polaroid, the innovation was the instant-picture camera, which the
> company first introduced in 1947. For Xerox, it was the 914 copier,
> introduced in 1960. (Masco's introduction of the single-handled Delta
> faucet was undoubtedly an innovation, but to call a cool faucet a
> technological revolution would be a stretch.)
>
> As for more innovative companies of the past half-century, none made the
> cut. It's worth noting that many other cutting-edge companies have
> posted huge stock gains -- only to miss out due to timing. Remember: To
> make this list, your 10 years of stellar returns must match up with a
> specific decade, as the term is commonly used.
>
> Leopards changing their spots
>
> If technological innovation isn't the key to earning "stock of the
> decade" status, then what is? Repositioning appears to be one
> possibility. A significant number of the companies that made the top two
> in past decades were not recent start-ups at all, but rather older
> companies in the process of reinventing themselves.
>
> Take Masco. From its founding in 1929 (only a week before the Great
> Crash) until the mid-1950s, the firm mostly made screws and related
> products, largely for the auto industry. But in the mid-'50s, the
> company introduced the Delta faucet. By 1958, Masco opened a new faucet
> factory and was well on its way to becoming a diversified company with
> strong market share in building and home improvement products.
>
> ChemFirst has a similar story. The firm came into existence in the
> late 1950s as a venture capital company. It didn't enter the chemical
> business until 1967.
>
> In the 1980s, Mark IV benefited from a repositioning. The company was
> founded in 1969 as a mobile-home manufacturer. Over the course of the
> 1970s, it became a maker of automotive and industrial parts. By 1981,
> Mark IV was out of the mobile-home business entirely.
>
> Notably, all three of the companies on this list decided to change their
> names to better their new focus. Masco was known as Masco Screw Products
> until 1961. Mark IV began life as Mark IV Homes, taking its new name in
> 1976. ChemFirst was founded as First Mississippi, but its name change
> occurred well after the stock's big decade was up.
>
> A closer look reveals that other companies on our list were reinventing
> themselves heading into their decade in the sun -- and renaming
> themselves as well. Xerox was primarily in the business of photography
> paper heading into the 1960s. Management believed so strongly that
> xerography copying was the company's future that in 1958, management
> changed the company's name from Haloid Co. to Haloid Xerox. In 1961,
> they changed it again, to Xerox Corp.
>
> Circuit City Stores was known as Wards Co. until 1984.
> The name change reflected the success of the chain's new Circuit City
> electronics "superstores." Keystone International, maker of valves and
> related products, was formerly known as The Keystone Tool Co. Its name
> change reflected the company's increasing globalization, which played a
> key role in the stock's decade of success. Keystone recently was
> acquired by Tyco International (TYC, news, msgs).
>
> Low-cost sales approach wins
>
> Dell isn't the only stock on the decade leader board that made it to the
> top largely through an innovative sales method rather than an innovative
> product. In the 1950s, much of Avon's advantage over its competition
> was its sales force of "Avon Ladies." For Avon, they were a low-cost
> way to reach customers.
>
> Circuit City also was a low-cost sales innovator. The company invented
> the electronics superstore concept in the late 1970s, a high-volume
> approach that made Circuit City the low-cost electronics outlet in many
> of its markets. And Wal-Mart Stores was up 4,700% in the 1980s on the
> strength of its low-cost superstore approach.
>
> "More than anything, what struck me looking at these results was what a
> great decade the '90s have been," says O'Shaughnessy. Not only has
> Dell's 55,000%-plus return blown away the winners of decades past, a
> handful of other stocks in the '90s have sprinted past the 10,000%
> return mark in the span of a decade as well -- a feat matched by only
> one stock previously, Masco in the 1960s.
>
> There are two possible lessons that can be drawn from this fact. Which
> you choose says something about you as an investor:
>
> Conservative investors might argue that the message is to proceed with
> caution in coming years, since our expectations might have been
> over-inflated by the '90s. Aggressive investors might read this as a
> warning not to sell winners too soon. The decade leader of the 1980s saw
> its price appreciate 8,300%. If you'd sold your Dell shares when they
> rose 8,300% this decade, you would have left an awful lot of money on
> the table.
>
> The stock of the naughts
>
> So what will be the stock of the naughts? Well, any pick is going to be
> a long shot, but for what it's worth, we are pretty sure that the stock
> exists today and is currently a small cap.
>
> The only thing preventing us from anointing the likes of Amazon.com is
> its market cap today. Dell had just a $275 million market cap when it
> started its run of the '90s, while Cisco's was about $700 million.
> Amazon's market cap already is more than $16 billion.
>
> Two related choices are eBay and Onsale, companies that take a
> different approach to Internet selling. Rather than market their own
> products, the two online auction specialists allow individuals to sell
> to each other. Onsale additionally sells close-out merchandise for
> electronics retailers like Dell.
>
> Perhaps the best fit for our "stock-of-the-decade" model is Egghead.com
> The company is an Internet retailer, certainly a cutting-edge,
> low-cost sales strategy. And it's in the process of reinventing
> itself, making the shift from its former position as a traditional
> retailer. The company even altered its name, appending a ".com".
>
> Egghead's market cap is just $390 million today. True, the stock already
> has had a nice run in the past year; we'd feel a bit better about the
> pick if Internet retailers gave back some of their recent gains during
> 1999. And there are plenty of critics who'll point out that there are so
> few barriers to entry on the Internet that competition will be fierce.
>
> But then there wasn't all that much preventing other companies from
> copying Dell, Circuit City or Avon -- yet each of those companies held
> its lead well enough to have one heck of a decade.
---- Adam@4K-Associates.com.sig triple play!
Next from the "lovely parting gift" department, Jill Barad, the former CEO of Mattel who stepped down under threat of termination by the board will receive a golden parachute valued at $40+ mln. it includes some debt forgiveness, $26 mln in cash, a pension worth over $100,000 per month for 10 years, and a full vesting of stock options (two thirds are worthless at today's price of $12.13). While we're sure most of us would like to be fired that way, shareholders have filed numerous lawsuits as this comes at a cost of $0.09 per share to earnings - that's $9 to Jill for every 100 shares an investor owns. No wonder shareholders are hopping mad. -- Option Investor Newsletter, May 1, 2000
Recently, a woman approached Jobs in a hallway at Apple, presented her certificate for 15 years service and asked him to sign it. Jobs read the certificate, handed it back unsigned and said, "Nobody should stay 15 years at one company." Then he walked away. If anyone tells you Steve Jobs has changed, they are wrong. -- Robert X. Cringely, http://www.pbs.org/cringely/pulpit/pulpit20000427.html
The more specific a prediction, the less likely it is to be correct. Predicting that stocks will go up is generally safer than predicting that a specific stock will rise (unless that stock is Microsoft). It's easier to say that consumers will buy higher-capacity removable data storage devices than to say they'll buy those devices from Iomega rather than from Imation, or from some outfit not yet heard from. But the "not yet heard from" category ought not to be rejected out of hand since that's where the real danger lies for current market leaders. Bill Gates worries far less about an Oracle or Sun -- competitors he knows and believes he understands -- than he worries about the startup that will inevitably clean Microsoft's clock. His nightmare has no name. -- Robert X. Cringely, http://www.pbs.org/cringely/pulpit/pulpit20000309.html
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