Special
The Motley Fool NOW Index

By Bill Mann (TMF Otter)

Welcome to the age of the NOW! The Motley Fool is building the world's first interactive economic index, which we call The Motley Fool NOW Index. Our objective is to compile a list of 50 of the best companies on the planet and allow them to help us track the economic performance of the most important industries for this and the next generation.

We are seeking to do nothing less than replace the Dow Jones Industrial Average (DJIA) as the most relevant gauge for investors to track the long-term performance of today's global leaders. But the NOW will not be a regurgitated list of high-tech companies; rather it will comprise of a broad array of enterprises exhibiting leadership in one or more areas crucial to modern commerce, including innovation, global branding, technology, and strategic vision.

We're invoking the spirit of Charles Henry Dow in a way that his namesake index does not. Dow listed as his main criterion companies with "a history of successful growth and wide interest to investors." The announced change of several Dow components this past week puts into sharp perspective how far the DJIA has strayed from this original objective.

What companies are we going to include in the NOW Index? Well, that's where the Foolish Community comes in. We are opening up the ballot box and taking suggestions from any registered Fool wishing to participate.

Before you get your creative jets going, a few caveats. The first is that we have already identified some companies that are "obvious" selections. These are listed on the right side of the page. While we'd love to hear your arguments as to why these companies should be included, don't worry about it. They're on the list. Where we need your help is in identifying the less obvious choices. Tell us what company you want included, and point to the NOW Index quantitative and qualitative attributes it meets. Just remember, the company's got to have a $4 billion plus market cap to be considered, so no "next big things." If and when they become the big thing down the road, they'll become eligible for inclusion.

Here are the objective and qualitative and quantitative criteria:

Index Objective

The Motley Fool NOW Index measures the performance of 50 of the best, most relevant businesses traded on United States exchanges, businesses exhibiting leadership, innovation, superior use of technology, global branding, and strategic vision. The Motley Fool NOW Index therefore provides investors the best, most relevant read on how the leading businesses did in the markets today, this month, this year.

Eligibility

Any company traded as a common stock or as an ADR on one of the major U.S. exchanges is eligible.

Qualitative Criteria

All companies in The Motley Fool NOW Index will be relevant to investors, having historically delivered superior returns to shareholders and holding promise of continued superior returns. Each company must be a business leader demonstrating some of the following qualities:

  • Superior Use of Technology
    We want companies that use new technology to maximize value to their shareholders. This could be as simple as using a more efficient centralized distribution network to the use of computers or advanced communications to accelerate product development.

  • Innovation
    Certain companies have generated new ideas that have revolutionized how commerce is done, either within their own industries or as part of the services they provide.

  • Strategic Vision
    Did you ever notice that some companies always seem to be in the right place at the right time? In most cases it's not a fluke; rather it is the result of management's ability to anticipate the "sweet spot," to get there first, and to keep the competition at bay.

  • Global Branding
    Some companies have managed to successfully compete in disparate markets around the globe. These companies have leveraged their brand names to capture marketshare as well as mindshare.

  • Strong Growth History and Prospects
    Does the company have a history of strong returns to investors? Is the company positioned in such a way that this growth will continue for the foreseeable future?

  • Culture of Accountability
    Only Foolish companies need apply. Are the company's communications with investors clear, concise, and fairly distributed, or does the company have a tendency to selectively report, favoring certain investors over others?

Quantitative Criteria

Each company must have a market capitalization in excess of $4 billion as of October 1, 1999 to be considered. This minimum amount may be adjusted in the future to account for overall growth in the market. In addition, each company should exhibit:
  • Annual sales/revenue growth of at least 15% over the past 5 years
  • Free cash flow greater than or equal to 50% of net income
  • Up to 20% of the companies may be selected based on their perceived potential to rapidly reach these criteria.
We will take nominations between November 1 and November 21. An announcement of the NOW Index components and valuations will be made on December 15, and the Index will begin tracking returns on January 3, 2000 (the first market day of the New Year).

While we cannot guarantee that your company will be included in the final list, we'll take each nomination into account. Nominate as many companies as you like, but only nominate each one time. This is not a popularity contest, it's your Foolish Index. And remember, the companies eligible to be on the list may be based in any country in the world, but they must be traded in the United States, either as a common stock or as an American Depositary Receipt (ADR).

Got it? So let's hear what you have to say! Spend some time batting around ideas on the NOW Index message board , and then when you're ready, click here to send us your nominations and be sure to tell us WHY the company should be included.