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10 stodgy stocks with fantastic futures
The newest members of my Future Fantastic 50 portfolio are agents of change bringing important new ideas to fields like energy, infrastructure, data and marketing.
By Jim Jubak
Whatever happened to the future? It sure seems a lot less exciting than it used to.
Remember way back in the run up to the bursting of the Nasdaq stock bubble in March 2000? Sure, some of those companies turned out to be shamelessly hyped. Some had cooked their books, or worse. And some were the equivalent of pyramid schemes.
But the bubble wouldn't have lasted as long as it did, nor inflated as far as it did, if there hadn't been some reality to the visions of the future that danced in our heads. The Internet really did revolutionize business, entertainment, retailing and communication. The wireless phone did produce massive changes in behavior. Biotechnology companies did produce extraordinary new drugs to fight cancer and other diseases.
And companies like Cisco Systems (CSCO, news, msgs), Amazon.com (AMZN, news, msgs), Qualcomm (QCOM, news, msgs) and Genentech (DNA, news, msgs) did deliver products -- if not always profits -- that justified a good deal of the excitement.
The excitement of those stocks, I'd be the first to admit, was a key motivation in launching the Future Fantastic 50 portfolio in July 1999. The idea, as I wrote in my July 30, 1999, column ("Votes are in! See the Future Fantastic 50 stocks"), was to come up with a list of stocks that would pass this simple test: If you were to look at this list five years in the future, you'd say about each entry: "Boy, I wish I'd have bought that five years ago, and I'd sure be willing to hold it for another five years."
How did they fare?
And now? It's hard to gaze across the stock market and feel anything like that sense of excitement about the next 10 years. Change hasn't slowed much, but the nature of that change and the character of the companies that embody it have. Looking out over the next 10 years -- as I do for the annual revisions of my Future Fantastic 50 portfolio -- the agents of change are energy providers and infrastructure builders, data collectors and data manipulators, and mass marketers and market extenders. There's no way that those companies are as sexy as those in the class of 2000.
I mean, come on now, Chicago Bridge and Iron (CBI, news, msgs) just ain't nowhere near as exciting a story as WorldCom was six years ago. Which, come to think of it, isn't such a bad thing, is it? In its first five years, ending in July 2004, the Future 50 portfolio, thanks to that excitement and the bursting of the Nasdaq bubble, lost 34%, compared with a 27% drop in the Nasdaq Composite ($COMPX) and a 16% decline in the Standard & Poor's 500 ($INX).
Related news and commentary on MSN Money
So, this year's update for the Future Fantastic 50, like last year's revision, emphasizes traditionally stodgy industries that, over the next five to 10 years, will revolutionize parts of the global economy. That worked well last year. From July 20, 2004, to this July 14, the Future 50 portfolio gained 21.8%, far ahead of the 12.3% gain for the Nasdaq and the 10.5% gain for the S&P 500. It's the second straight year that the Future 50 has beaten those two indexes. (Last year, it was a 12.9% gain for the Future 50, a return of 10.2% for the Nasdaq and a return of 11.1% for the S&P 500.)
10 stocks leaving the Future 50
Since its start six years ago, this portfolio is down 19.6%, which essentially matches the 19% drop in the Nasdaq but trails the 8% loss on the S&P 500, largely because of the dividends paid by the stocks that make up that index.
The annual revisions of the Future 50 are designed to produce about 20% portfolio turnover.
Every year I look for five stocks to move out of this very aggressive portfolio and into the more conservative blue-chip 50 Best Stocks in the World portfolio when I revise that list in September. This year, I'll transfer Adobe Systems (ADBE, news, msgs), Paccar (PCAR, news, msgs), Rio Tinto (RTP, news, msgs), Taiwan Semiconductor (TSM, news, msgs) and Whole Foods Market (WFMI, news, msgs) to the 50 Best list.
And every year I look for five stocks to drop from the list, either because they've been acquired or because the company hasn't lived up to its business promise. This year in this group I'm dropping MBNA (KRB, news, msgs), Netegrity, (now part of Computer Associates) and SunGard Data Systems (SDS, news, msgs) because they have either been acquired (Netegrity), are in the process of being acquired (MNBA) or are about to go private in a leveraged buyout (SunGard Data). I'm dropping Performance Food Group (PFGC, news, msgs) because of the sale of the company's fresh-packed salad business and Conexant (CNXT, news, msgs) because the Internet-access market continues to move away from the company's product line.
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