Fortune Magazine's "Ten Stocks To Last A Decade"

In the year 2000 (cue Conan O'Brien skit), Fortune Magazine wrote an article where it named "Ten Stocks to Last a Decade." Bill Barker over at The Motley Fool took a look back at the stocks named in that article and how they have performed since then. The results speak for themselves:

• Broadcom (BRCM)..... -78%
• Charles Schwab (SCHW)..... -51%
• Enron..... oops
• Genentech (DNA)..... 121%
• Morgan Stanley (MS)..... 0%
• Nokia (NOK)..... -45%
• Nortel Networks (NT)..... -96%
• Oracle (ORCL)..... -53%
• Univision..... -42%
• Viacom...... Kind of hard to explain

For those of you who aren't familiar with Enron, the company was one of the most notorious bankruptcies of all time, the stock ended up being worthless, and many of its executives faced jail time. One even committed suicide.

Viacom is hard to explain because it spun off some units in the ensuing years, so it is more difficult to track.

I was curious what a portfolio made up of $1000 of each stock purchased in 2000 would look like today, so I put together this table (you may have to scroll down pretty far due to formatting issues):

		Return	Value in 2000	Value in 2007
	Broadcom	-78%	1,000	220
	Schwab	-51%	1,000	490
	Enron	-100%	1,000	-
	Genentech	121%	1,000	2,210
	Morgan Stanley	0%	1,000	1,000
	Nokia	-45%	1,000	550
	Nortel	-96%	1,000	40
	Oracle	-53%	1,000	470
	Univision	-42%	1,000	580
	Total Portfolio Value		9,000	5,560
	Total $ Loss			3,440
	Total % Loss			-38.2%

So as you can see, the total loss would have been on the order of -38.2%.

I did some research on Yahoo Finance, and according to their historical pricing, if you had invested $9,000 in the iShares S&P 500 Index (IVV) in August of 2000, you would have $9,492 today, for a gain of about 5%.

The lessons I take away from this are similar to some of the lessons John Dorfman wrote in his final bloomberg column (see my previous post on this): don't listen to the experts, out-of-favor stocks are the best road to capital gains, and perhaps most importantly, predicting the market with consistency is extremely difficult.

So unless you think you can pick stocks better than Fortune magazine (which some people can), you are probably best limiting your equity investments to low-cost, highly diversified index funds that will allow you to match the market's overall returns every year.