The Fool Announces NOW 50 Stocks

By Bill Mann (TMF Otter)

(Dec. 15, 1999) --On November 1 The Motley Fool announced our intention to develop a new market index, The Motley Fool NOW 50 Index. In the process, we tried to do something that had never been done before -- create an index based on nominations from individual investors. Today, we are pleased to unveil the list of 50 companies that will make up the NOW 50.

First, we'd like to say "thank you!" to the thousands of Fools who submitted companies for inclusion. We expected that the response would be significant, but we were frankly unprepared for the level of participation we received from the Foolish Community. And while we have not been able to include every company that was nominated, we have reviewed every single post and e-mail we received, looking for those nuggets of information as to why a company should (or should not, in some cases) be in the NOW 50.

The total number of companies nominated was 268. Add to this number the original 20 selected companies, and we have a group of 288 companies from which we had to pick the 50 representative of the best businesses traded on U.S. exchanges. In some cases, companies that ended up on the final list are ones that none of us had even considered prior to the launch of the NOW 50. The Community-nominated companies came from industries as diverse as oil services and intimate apparel. We are confident that the final list represents a diversity of industries and a singularity in excellence. In the end, the process for selection was grueling, and selecting one company as being clearly superior to another proved to be a Fool's task. We are confident that those selected are 50 of the best, most relevant companies on the planet.

The limitation of 50 companies proved to be quite constricting. Nearly all of the companies nominated have characteristics that one could describe as excellent or relevant. Still, a choice had to be made, and choose we did. With each company we asked ourselves the question: "How is this company excellent?" Those remaining on the list were the ones that the majority of the trustees singled out as having something exceptional about them -- a leadership quality in innovation, global branding, technology, or strategic vision. Many of the companies, in fact most of them, exhibit superiority in more than one of these fields.

Perhaps the most difficult task in evaluating the 50 most relevant companies was finding companies that met both the qualitative and quantitative guidelines. After all, the majority of companies we even considered are in growth phases requiring significant reinvestment of capital. Should a company such as Lucent be ignored simply because its Free Cash Flow numbers are currently lower than we would like? Probably not. As such, we have leaned more heavily on the qualitative measures and less on quantitative than we had originally planned. As a result, we believe that the NOW 50 will be more representative of the most dynamic portions of the global economy than it would have otherwise.

The NOW 50 index differs from its peers in several ways. First, the community nomination process. Second, the NOW 50 seeks not only to track those companies most relevant to investors and consumers today, but also those companies that we believe will continue to remain so. We reject the Dow Jones Industrial Average as the premier gauge for market performance due to its dependence on the industries of yesterday, its equal weighting, and its unresponsiveness to the changes in the global economy. Similarly we question the lack of representation of international companies in the Standard & Poor's 500 index. International borders are becoming less and less relevant in the world of global commerce.

Our process for selection was simple: collaborative discussion of the nominations amongst the trustees and then independent closed ballot voting, with each vote confirming inclusion for some companies and eliminating others. This process was repeated until we had confirmed 50 companies and eliminated all others.

This exercise was undertaken to form an index, not a portfolio. We gave no consideration to whether a company was "overvalued" or "undervalued." Certain stocks on the final list have enjoyed immense appreciation of value over the last year, while some have declined in value. Our focus has been on the businesses themselves, and whether those businesses are representative of the best companies in the world.

As we announced earlier, The Motley Fool NOW 50 Index will begin tracking the performance of the companies on the first day of market trading in the year 2000, January 3rd. At that time we will also publish a brief description on each component company, detailing what it does and why the trustees considered it to be particularly apt for inclusion. We have sought to create a benchmark that is the most relevant for the individual investor, one that tracks the performance of the best of the world's companies through a representation of their peers, using a process that included the input of our peers, the Foolish Community.

We hope you like the results.

Bill Mann, on behalf of the trustees:

Brian Bauer
Brian Graney
David Braze
David Gardner
Ann Coleman
Selena Maranjian
Matt Richey
Chris Rugaber

The Components of the Motley Fool NOW 50 Index:

Find out more about these companies in the Quotes and Data area, and discuss the index on the NOW message board.

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