The Best Stocks of the Millennium

What have been the best stocks to own in this new millennium, by all accounts the most Britney-filled of all the millennia on record so far? And what, if anything, can we learn by simply running a couple of quick computer screens to find the answer?

The results are different from any predictions that I recall seeing or hearing when we said goodbye to the old millennium, which, for the purposes of this column (and acknowledging arguments to the contrary), we'll assume ended on Dec. 31, 1999. This was supposed to be the decade, century, and millennium of Internet shopping, online brokers, biotech, renewable fuels, regenerating limbs, and every other visionary departure from the mundane and antiquated mechanisms that got us through the dark and uneducated times known as the 20th century.

The runners-up ...
In terms of which companies have grown sales the most this century, a lot of those forward-looking companies have indeed been awesome. Unfortunately, they haven't been nearly awesome enough to translate into rewards for late-1999 purchasers of their stocks. Just take a look at the return from these companies, which have grown sales by more than 25% annually for the past seven years and had sales of at least $100 million already in 1999.

Company

Total Revenue 7-Year CAGR

Stock Price Change Since

Juniper Networks

47.4%

(60%)

Biovail (NYSE:BVF)

30.6%

(4%)

Brocade Communications

34.1%

(78%)

Yahoo!

37.1%

(74%)

Foundry Networks (NASDAQ:FDRY)

46.2%

(90%)

Data from Capital IQ, a division of S&P.

These companies are by no means failures. Nevertheless, by the time the end of 1999 rolled around, they had expectations embedded in their prices that required even more growth than they achieved.

And the winners are ...
So what has done well this millennium? Done well? Forget that! What's done the best?

I ran a screen for the best-performing stocks of the millennium, with the caveat that they had to have share prices of $5 or more at market close on Dec. 31, 1999.

At the very top of the list were the cyclical heroes of the millennium so far -- homebuilders and energy stocks -- and some pharmaceutical wonders. If you could have predicted that interest rates were going to get as low as they did, you could have had an inkling of the strength that the homebuilding stocks would enjoy.

But you'll also see some big winners you may never have heard of, including Middleby (Nasdaq: MIDD  ) , the best-performing stock of the millennium under these constraints. Take a look:

Company

Product

1999 Market Cap

Price Change
This Millennium

Middleby

Ovens

$57 million

2,340%

Precision Castparts (NYSE:PCP)

Metal castings and fasteners

$643 million

1,486%

Oshkosh Truck (NYSE:OSK )

Trucking

$487 million

663%

National Healthcare

Management of long-term health-care facilities

$60 million

877%

Seaboard

Pork processing and shipping

$289 million

1,183%

ITT Educational Services

Post-secondary education

$382 million

1,159%

Harman International (NYSE:HAR)

Audio systems

$969 million

768%

Data from Capital IQ.

Other industries represented on the list of 62 companies that passed the screen of returning at least 600% included slot machines, pool supplies, and wire manufacturing.

There's nothing special about those results or this particular time frame; the same thing would be shown in nearly any randomly chosen longer-term time frame, including 50- or 60-year periods. When Jeremy Siegel set out to study which companies had been the best investments out of the original S&P 500 lineup over the period from 1957 to 2003, he found that the No. 2 and No. 3 companies started out as producers of glass and cans.

The Foolish conclusion
What many of the Millennial Winners have in common is that they were small, established, profitable companies producing things that had worked for decades ... largely ignored things ... things that don't usually create headlines or dreams of quick riches.

Of course, that's the point. The better-performing companies of nearly any time period are going to be the ones that don't have fanciful expectations built into their stock prices, but rather have a demonstrated history of being able to succeed as tastes, technologies, and markets change.

These are the kinds of companies we look for in Motley Fool Hidden Gems -- small, ignored companies doing unappreciated, profitable things. It's worked out so far with Middleby, the best-performing non-cyclical stock of the millennium so far and one of our earliest recommendations, and the strategy has produced total average returns of 57%, versus 24% for the S&P 500.

If you'd like to learn more about our service, a free, no-risk 30-day guest pass to Hidden Gems is yours for the taking.

This article was originally published on Sept. 18, 2006. It has been updated.

Bill Barker does not own any stocks mentioned in this article. Middleby is a Hidden Gems recommendation. Yahoo! is a Stock Advisor recommendation. The Motley Fool has a disclosure policy.


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