Stocks for the Next Decade

Last year, Kiplinger ran an article called "10 Stocks for the Next 10 Years." A few days ago, USA TODAY published a piece titled "Will the Next Decade Be Better for Stocks than This One?" As investors, these articles provoke our interest -- after all, we're all trying to find the world's next Google (Nasdaq: GOOG  ) or Microsoft (Nasdaq: MSFT  ) .

But these days, it's hard enough to find a solid stock for the next few years, let alone the next decade. How helpful is it to look 10 years into the future?

10 picks from last decade
In August 2000, Fortune released its 10 stocks for the following decade. The magazine's portfolio included time-honored companies such as Morgan Stanley (NYSE: MS  ) and Nokia (NYSE: NOK  ) . Out of the 10 stocks they chose, only one increased in value; two went bankrupt, and the rest saw pretty terrible returns. Overall, the portfolio netted a -44% return, while the S&P 500 saw a -25% decline. Not exactly a great track record.

In February 2000, The New York Times asked 10 superinvestors (including Bill Miller of Legg Mason Value Trust) for one stock pick each -- essentially creating their own 10 stocks for the next decade. And although strong companies like Oracle (Nasdaq: ORCL  ) and Cisco Systems (Nasdaq: CSCO  ) made the list, only two stocks out of the 10 saw an increase in value. Yet despite so many bad picks, this portfolio actually managed to deliver a whopping 33% versus the S&P 500's -18% over the same time period.

With both portfolios demonstrating terrible accuracy and poor acumen for predicting the next decade, how did the second portfolio perform so well?

The two stocks that went up in the second scenario didn't just go up -- they skyrocketed. Henry Schein, the single best performer, saw a 600% gain.

Regarding such magnificent picks, Peter Lynch has said that "one or two of these can make a career."

Making your own career
When you're ready to choose companies to hold for the next 10 years, what types of stocks will you look at? In these tumultuous times, no one would fault you for investing in dividend stocks -- after all, they have a great track record and provide you with a steady stream of income. Or you could invest in value stocks; if you think another recession is bound to hit, value investing has some excellent virtues to covet.

However, it seems much smarter to invest in growth stocks -- companies that are breaking the rules of their industries, and delivering shocks to their competitors. These sorts of companies have the ability to generate astounding profits for any investors opportunistic enough to find them early on.

Just think about the New York Times article. Eight out of the 10 stocks had negative returns, but it only took one home run to turn a dismal portfolio into a spectacular one. If 10 of the world's best investors only had a combined accuracy of 20% and still managed to deliver huge gains, we need to realize that it's not accuracy we're after -- it's growth.

How to plan for the next 10 years
A note of caution, though: Growth stocks are risky. You can win big, but you can lose big as well. It takes a certain type of investor to seek out growth stocks; not everyone is willing to roll the dice. If you're not that person, you can still be successful with other strategies.

But if you are that person, this is the place to be. At Motley Fool Rule Breakers, our co-founder David Gardner has been finding and recommending disruptive companies since 2004. Since then, Rule Breakers has beaten the S&P 500 by a remarkable 21 percentage points! Better yet, David's been able to deliver such amazing returns to our community through a fairly simple approach.

David looks for earth-shattering companies. Sometimes he picks a winner, and sometimes he doesn't. For instance, earlier this year, David recommended buying First Solar (Nasdaq: FSLR  ) , an industry leader in the field of solar technology. It's currently down about 20%. To be honest with you, there have been plenty of those losses. But then there's Intuitive Surgical, which David first singled out in 2005. Knowing an innovative company when he saw one, David went on to recommend the company three times over, amassing more than 1,100% since. Those types of gains are enough to wipe out any number of losses.

Sure, I could provide you with a list of the stocks I think will be great for 2020, but I'd be lying if I said they were a sure thing. I'd rather tell you which types of stocks to look for. Find an industry that has tons of potential -- our team specifically looks at nanotechnology, alternative energy, and biotechnology -- and then find a company with the ability to be a market leader and a constant innovator. If you can get in early on something like Intuitive Surgical, you'll be set for the next decade.

If you want help getting started, the Rule Breakers team is offering a 30-day free trial. You'll receive access to all of David's past and present recommendations, in addition to the eight stocks he thinks you should buy right now. If being a Rule Breaker is part of your investing DNA, click here for more information.

Already a member of Rule Breakers? Log in at the top of this page.

Fool contributor Jordan DiPietro owns shares of First Solar. First Solar, Google, and Intuitive Surgical are Motley Fool Rule Breakers recommendations. Microsoft and Nokia are Motley Fool Inside Value picks. Motley Fool Options has recommended a diagonal call on Microsoft. The Fool owns shares of Oracle. The Fool's disclosure policy never breaks its own rules.


Read/Post Comments (10) | Recommend This Article (70)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2009, at 12:04 PM, tkell31 wrote:

    I've taken some shots...probably more then I should...with small caps I think may be be poised to break out. APWR, NEP, CHBT, CSKI...kind of a China theme, but so far so good. I'm curious to see what next year will bring.

  • Report this Comment On December 31, 2009, at 1:05 PM, plange01 wrote:

    rimm is finishing the year with a gain look for this company to be a tech leader in 2010.as companys with huge increases in 2009 ...aapl,goog, amzn,bidu give back some of their gains.

  • Report this Comment On December 31, 2009, at 1:26 PM, PeyDaFool wrote:

    "Sometimes he picks a winner, and sometimes he doesn't. For instance, earlier this year, David recommended buying First Solar (Nasdaq: FSLR), an industry leader in the field of solar technology. It's currently down about 20%."

    Thanks for brining a little reality to this site. No one can pick a winning stock 100% of the time, but it's also rare to find articles that show the reality: that MF is a great tool for investment education and occasionally acts humble enough to own up to some bad calls. There's nothing wrong with making investment mistakes, so long as you learn and adapt to new and emerging market trends.

  • Report this Comment On December 31, 2009, at 1:34 PM, plange01 wrote:

    i expect 2010 to be a bad year for stocks and a good time to have extra cash...my big name picks i expect to out perform are ...exxon,rimm and boeing..

  • Report this Comment On January 01, 2010, at 12:13 PM, Chinastocks55 wrote:

    CWS: China Wind Systems:

    CWS: China Wind System on Nasdaq now.

    A message board poster made a very good point yesterday concerning China Wind Systems.

    It went onto the Nasdaq on 12/29/2009 and opened very big and made a quick dip in the last 2 days of trading but is still up nicely on the listing.

    The company would have been better served by waiting until the upcoming week to make the step up to Nasdaq.

    The uplist got lost in the Christmas/New Year hoopla. The ECSC board members know about it but the general investing public missed this important news.

    Imho, they will gain awareness this week.

    Information is money.

    Imho, China Wind Systems will be a very strong performer in the month of January and 2010 in general.

    That is a sexy stock and will see serious money flow now that its on Nasdaq.

    Investors should take some time to do the DD on that situation over the weekend, imho.

    NOTE: China Wind Systems is involved in several of the very hottest growth areas in China. Take a look.

    Company profile:

    China Wind Systems, Inc., through its subsidiaries, engages in the manufacture and sale of textile dyeing and finishing machines; high precision forged rolled rings for the wind power industry; and other industries specialty equipment used in the production of coal generated electricity. The company?s Dyeing and Finishing segment designs, manufactures, and distributes a line of high and low temperature dye and finishing machinery. These products are used in dyeing yarns, such as pure cotton, cotton-polyester, terylene, polyester wool, poly-acrylic fiber, nylon, cotton ramie, and wool yarn. Its Forged Rolled Rings and Electrical Power Equipment segment designs, manufactures, and sells auxiliary equipment used to improve and promote efficient coal use at coking and power plants. Its product line comprises spiral plate heat exchanger, cross-tube gas cooler, cloth-type dust collector, and desulphurization regeneration tower. This segment also offers high precision forged rolled rings for use in the wind-generated power and other industries. The company also provides technology consulting services relating to water-treatment equipment, heat exchangers, coking equipment, and wind power generation equipment. It primarily serves coking plants and coal-fired power stations; and wind power and railway and heavy vehicle manufacturing industries in the People?s Republic of China. The company was formerly known as Malex, Inc. and changed its name to China Wind Systems, Inc. in December 2007. China Wind Systems, Inc. was founded in 1995 and is based in Wuxi City, Chi

    China Wind System stock page in NY Times:

    Note the 5 day chart on this page. A very nice buy-in op right now, imho.

    http://topics.nytimes.com/top/news/business/companies/china-...

    CWS Nasdaq news:

    http://money.cnn.com/news/newsfeeds/articles/prnewswire/CNM0...

  • Report this Comment On January 01, 2010, at 12:50 PM, cmm3 wrote:

    EAFE stocks are the stocks for the next decade, and beyond!

    http://eafepro.com

  • Report this Comment On January 01, 2010, at 1:33 PM, h53echo wrote:

    I am looking for Cloud Computing to be one of the decades major growth engines for the companies that get in on the ground floor.

    In my own account I have set $10,000 as a full position. My only full position currently is in BHP,O (double full position),EWZ, GOOG,AAPL, and 1/2 positions in QCOM,NUAN,CGA,TLEO,FUQI,IFN,NOV,FLIR,ETY,BOE,EXG KTCC and GORO. I sold out of AVAV and 2/3 of QCOM at year end to take gains and be able to add to AAPL and O.

    Any comments would be appreciated.

  • Report this Comment On January 01, 2010, at 8:17 PM, xetn wrote:

    Chinastocks55:

    Just for your information, China is now the 3 rd largest installation of wind energy systems. The problem they have is practically none of it is hooked up to the grid. They haven't figured out how to do that transmission thing yet. They have spent a huge fortune on building wind farms but forgot the one big step in the process.

    (I live in China and this was highlighted but the government last week.)

  • Report this Comment On January 09, 2010, at 10:02 AM, Fool wrote:

    The reason China has wind farms unconnected to the grid is that they're gaming the carbon credit market, they didn't forget the 1 big step they just found that they can make money without it.

  • Report this Comment On January 12, 2010, at 2:04 PM, dandin27 wrote:

    Suprises for the Next Decade:

    China Bluff Exposed, Regime Overthrown- China's communist regime continued to print money, lending it everybody that wanted and didn't want it. The giant housing, infrastructure, and manufacturing came to a violent crash when the debts where not paid and inflation forced the authorities to tighten despite massive unemployment. The combination of high inflation and high unemployment in the urban centers took the people to the streets. The Chinese citizens refused to accept state intervention in the economy and their personal life demanding more personal and economic freedom resulting in prolonged civil unrest which almost reached a full scaled civil war. The collapse of the Chinese regime and economy resulted in a colossal bust for commodity prices, albeit temporarily and caused a severe recession in Australia, Brazil, Russia, Argentina, and the Gulf States.

    http://israelfinancialexpert.blogspot.com/search/label/predi...

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