The Greatest Companies of 2020

I recently compiled a list of the 20 greatest companies I know.

These companies have not only shown dominance in the past, but also promise dominance in the future, with business models that allow them to crush competitors and earn excellent profits.

Today, I want to look out to the end of the decade, and highlight the companies that have the best shot at nudging aside some of my favorites to make my list of "20 greatest companies" in 2020. If they can do this, they will also almost surely rank as some this decade's greatest stock performers.

Let's run down a list of four strong contenders, before I predict which one I consider most likely to achieve elite status.

Contender: Apple (Nasdaq: AAPL  )
We'll start with the company omission that riled up a host of the readers of my list.

To their point, Apple has a strong story. Its ability to reinvent itself from a computer also-ran to the "it" purveyor of all things high-end hardware in a decade is simply amazing. You could make an impressive tech portfolio entirely from the companies feeding off Apple's wake, including Cirrus Logic, TriQuint, Skyworks, and Zagg.

But Apple doesn't make the current list because I was looking for companies that are high-probability bets to be thriving years and years into the future. It's quite possible that Apple will do so, but it's no sure thing. Remember, the company was the subject of many a "what-went-wrong business case study" just a decade ago; it competes in a massively evolving and converging space against primo competitors; and it relies heavily on the iconic leadership of Steve Jobs.

It may surprise you to learn that I am contemplating picking up shares of Apple at current prices, but that's still a lower hurdle than being a top-20 company.

Contender : BP (NYSE: BP  )
Do I really think BP will make 2020's "greatest companies" list? I wouldn't bet on it. But I don't preclude it, either.

Why? Let's look back at the reputational rehabilitation of one of its competitors. Recall ExxonMobil's (NYSE: XOM  ) Valdez oil spill in 1989. You may argue that BP's Deepwater Horizon spill was worse, but Exxon was still a laughingstock at the time, making environmental watchlists rather than lists of "great" companies.

Yet a couple of decades later, it's one of my 20 greatest companies. A Goldman Sachs analyst took it one step further in 2008, saying, "It's the world's greatest company, period."

It's a high hurdle for BP to reach Exxon's heights, but at the very least, I'm looking at history and thinking about BP as a possible investment.

Contender: Annaly Capital (NYSE: NLY  )
From its inception in the late 90's, mortgage REIT Annaly Capital has been a serious moneymaker for investors, returning more than 500% to shareholders, including dividends. I don't have to remind you how poorly the market as a whole has performed in that time.

Its dividend yield currently stands at 14.3%, and prospective investors wonder whether it can keep up these serious dividends (and overall returns). As I've detailed before, Annaly makes its money off of the interest rate spread between its borrowings and the agency-backed mortgage-related securities it buys.

Throughout most of its history, Annaly has enjoyed the one-two Greenspan-Bernanke punch of historically low interest rates on its borrowings. If we enter a harsh interest rate environment, Annaly's dividend won't stay at these elevated levels. But this cyclicality doesn't preclude market-beating returns. If we see Annaly come through tougher times with strong returns, it may be hard to deny Annaly and its CEO Michael Farrell a spot on the list in 2020. Of course, that brings up the Steve Jobs-like problem of iconic leadership...

Contender: Intuitive Surgical (Nasdaq: ISRG  )
Now this is a growth story. Intuitive Surgical grew earnings per share by 96% in 2007, by 38% in 2008, by 16% in 2009, and by 60% last year. Analysts expect 17% growth this year, and another 17% in 2012.

Intuitive is literally cutting-edge as it seeks to revolutionize surgery through robots. Unlike other futuristic-sounding companies, though, Intuitive Surgical isn't some pie-in-the-sky concept that only sounds good in theory. Its da Vinci surgical systems are already in use and wildly profitable, and Intuitive has net margins of 27%.

I own shares of Intuitive Surgical and it almost made the cut of my current list of 20 greatest companies. If it keeps on keeping on, it'll surely make 2020's list.

My No. 1 Contender
You may have guessed from my glowing write-up above, but I believe Intuitive Surgical has the strongest shot of making my list of the 20 greatest companies in 2020. It rides the megatrend of finding cheaper, more effective health care as we face increasing constraints. And it pursues its goals off an already impressive base of profits. We shall see.

If you'd like one more great company to consider, click here for our free report: The Only Energy Stock You'll Ever Need. Hint: It's not ExxonMobil or BP.

Anand Chokkavelu owns shares of Intuitive Surgical and ExxonMobil. A person with the ticker symbol TRU heads his list of 20 Greatest People of 2011. Apple is a Motley Fool Stock Advisor pick. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Annaly Capital Management, Apple, ExxonMobil, Cirrus Logic, and TriQuint Semiconductor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (55)

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 April 16, 2011, at 6:19 AM, dilipcletuspinto wrote:

    interesting read. If there's a company which I could suggest it would be Reliance Industries. well diversified portfolio. Also the recent deal with BP could help reliance in the future.

  • Report this Comment On April 16, 2011, at 1:41 PM, TMFBomb wrote:

    @dilipcletuspinto,

    Thanks for throwing your pick out there!

    @all,

    By the way, the four I chose to highlight are obviously not an exhaustive list.

    There will surely be advocates for companies like the social media companies (Facebook chief among them), Netflix, and Whole Foods. The last one of those is also high on my list of potential great companies. It was in serious contention for my current list (and I still own shares despite paring down my position a bit earlier in the year).

    Fool on,

    Anand

  • Report this Comment On April 17, 2011, at 9:40 AM, buffalonate wrote:

    I think stem cells will make Intuitive Surgical a bit player in 10 years. Stems cells are already being used to treat defective heart valves. I think First Niagara Financial Group or Buffalo Wild Wings are both better choices. First Niagara has doubled its bank branches in the last 2 years through acquisitions. I don't think there is any other bank that can compete with that. Buffalo Wild Wings is well managed and you know it will be a huge company 10 years from now. I think Intuitive will still be stuck in the hysterectomy, prostate gland surgery market in 10 years. It will grow for sure but it won't be a huge company.

  • Report this Comment On April 18, 2011, at 1:07 PM, mikecart1 wrote:

    The Real Greatest Companies of 2020:

    MO

    PM

    MCD

    S

    BAC

    U mad?

  • Report this Comment On April 18, 2011, at 4:07 PM, midnightmoney wrote:

    It's obviously got to be bp, on the nothing short of sublime, 2+2=5esque logic that when oil companies wreak destruction they will obviously go on to become great companies:) I love it!

  • Report this Comment On April 19, 2011, at 11:32 PM, ravens9111 wrote:

    You pick some names on the list that are already great companies. If you are looking for the "next" great company, I think you need to dig deeper and find the ones that are under the radar right now. None of the names given, in my opinion, fit that category. Instead of NLY, I would rather take a gamble with PMT, Pennymac. Like you said, NLY has returned investors 500% since the '90s. They are already a household name for high dividends. Unlike NLY, who earns money on the spread, PMT makes their money by buying defaulted mortgage Notes for pennies on the dollar. They then restructure these non-performing so they can begin collecting payments. They pay out over 9% on their dividend right now. I also think their dividend will be growing, while NLY's will most likely be cut.

    ISRG is a "first mover" and leader in robotic surgery. They will definitely be a great company in the future. The only question is how much are you willing to pay for 17% growth? I would think not too much. That is not great growth. A premium for that stock would be overpriced in my opinion. Instead, I think you need to look at other robotic surgery companies that will be coming out in the near future. There are a handful of them. MAKO is one that could be a major player in the future. The real question is, will ISRG remain dominant and grow by acquisitions? Or, will they grow through development new and improved technology by adding new robotic machines in a pipeline?

    I think you should be looking for who the next Apple is going to be. Like you said, Apple came out of nowhere. Which company is under the radar that can make as significant an impact in the way we live? Will it be a new biotech company that comes out with some new breakthrough drug that cures diseases? Will it be another technology that makes a tablet look like a PC? Will it be another company that makes cloud computing obsolete? These are the types of companies that should be what we are looking for ten years from now. What has Microsoft or Cisco done since they were the top company ten years ago? They have done NOTHING.

  • Report this Comment On April 22, 2011, at 7:31 PM, vaidybala wrote:

    In my opinion, companies pioneering in stem cells, biotechnology, electric cars all will spring forth to full bloom from somewhere on earth. Note Asia's potential.

  • Report this Comment On May 03, 2011, at 12:19 PM, louchios50 wrote:

    income vs cost of living is shrinking, people will get cheap and buying electric cars and experimental medical procedures that requires an elitist life style is not on 95% of americas budget. buy what low income earners need and can afford.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1476413, ~/Articles/ArticleHandler.aspx, 9/1/2014 3:35:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement