Ten Stocks for the Next Ten Years
Core holdings are cheaper now than they've been in some time.
Every once in a while, you read an article that sticks with you for a long time. One that I remember well--as a sobering reminder of the danger of following the herd--ran in the New York Times in late February 2000. The author asked 10 "very smart, very successful investment professionals" to each pick one stock for the next 10 years.
Predictably, given the market environment at the time, six of the 10 were tech stocks, with shares trading for an average price/earnings ratio of 70. (That's without including the stratospheric P/E of JDS Uniphase (JDSU).) All six have been cut in half or worse over the past six years. Returns for three of the remaining four stocks ranged from flat to up 130%, with one stock shooting the lights out with a 650% return. The highest returns came from the two stocks that I'll bet most readers of the article at the time were least likely to buy--a struggling trash-hauler, and a distributor of dental equipment. It shouldn't come as any surprise that those stocks also sported single-digit P/Es at the time.
Pat Dorsey has a position in the following securities mentioned above: MA. Find out about Morningstar’s editorial policies.