BI > MARCH 2003

It's Three Wins in a Row

Hare Stumbles to Worst

Every year since 1956, Better Investing has compared the performance of its Stocks to Study (the tortoise) from about five years ago with the Dow Jones industrial average (the hare) for the corresponding period. The tortoise wins for the third year in a row this year and increases its lead in this 47-year-old contest. The all-time score stands at Tortoise 29, Hare 18.

An example of how to read this table: The market price of Avery Dennison increased from $40.00 to $61.08 since the company was featured as a Stock to Study in January 1998. The stock price appreciation, adjusted for stock splits during the five-year period, represents an increase of 8.8 percent per year. Avery Dennison paid an average annual dividend yield of 2.0 percent for the period. Combining the price appreciation and income gives us an annual total return over the period of 10.8 percent. The best performing stock was Linear Technology with an annualized total return of 39.3 percent. The worst performing stock was FiberMark. The goal Better Investing's Securities Review Committee strives for in selecting cover stocks is an annualized total return of 15 percent over five years, a result that three of the 12 stocks achieved as of year-end 2002. The Dow Jones industrial average (DJIA) continued to "rest" (as all hares tend to do) and ended the last five years at 1.0 percent -- the lowest result since 1974. BI's Stocks to Study lead the traditional "Tortoise and Hare Race" -- 29 wins for BI vs. 18 wins for the DJIA.

Stock to Study 1983 - 1989

Stock to Study 1990 - 1999

Stock to Study 2000-2002

It's a simple quest seeking the answer to a simple question: Can a group of investors gather on a monthly basis, for about an hour or so, and pick good stocks?

It's an important question. The Bachelorette can only pick one of of the gentlemen. Joe Millionaire doesn't really have a stash of cash, yet. The rest of us have to build nest eggs the really old-fashioned way.

And that's the good news. A few years from now, Jerry Springer will air the show, "I was dumped by that 2002-2003 reality TV show celebrity." Between now and then, NAIC investors will be building effective portfolios and picking good stocks, most probably avoiding an appearance on the Springer show.

Spritely Stock Selection Committees

The answer is "Yes!" Nearly 50 years tells us so. The average annualized return in this 47-year-old contest for selections made "around the kitchen table" is 14 percent. Darts tossed at the Dow Jones dartboard and delivered by aerial hare have netted 10.6 percent. We know better than to convene a celebration of tortoises because only hares get too emotional over the results of any particular year. But this is a three-peat, and tortoises nationwide are invited to high five around the water cooler.

The best-performing selection from 1998 was Linear Technology (see chart, above), the Stock to Study from November 1998. Fair, Isaac & Co. also contributed to the hare-trouncing performance in the 1998-2002 edition of this long-term contest.

1999-2003 Progress Report

The 48th annual race (which ends one year from now) is a little tighter and too close to call at this point. The Stock to Study stable is down approximately 2 percent during a period in which the hare (Dow Jones industrial average) has sagged some 4 percent. (see table below)

Other Races In Progress

If the tortoise survives the 1999-2004 group, a healthy dose of telecommunications equipment stocks and technology issues in the 2000 group threatens to bring the streak to an end. But it's not over 'til it's over, according to Yogi Berra. Patient tortoises think so, too. More technology and more telecommunications in the 2001 group have gotten off to a very rocky start, as well. This group and the subsequent 2002 selections have some catching up to do, but the tortoise has grown pretty accustomed to being in this position early in races.

The Finish Line

Three victories in a row have been a welcome respite. The margin of victory for 1998-02 was the largest since 1991. Keeping longer time frames in mind, the Stocks to Study have averaged an annualized rate of return of 16 percent over the last 20 years, while the hare has delivered 14.9 percent.

Since the hare was last seen discussing the virtues of naps and hibernation with his cousin, the bear -- the road ahead never looked better for our tortoise.

*Note: Denotes periods in which the tortoise beat the hare. Results are expressed in terms of compound annual increases. A doubling in value is equivalent to an annualized rate of 14.9 percent.

Mark Robertson is director of online resources and senior contributing editor for BetterInvesting. He serves as a member of BetterInvesting Magazine's Editorial Advisory & Securities Review Committee. Mark can be reached at Robertson_Mark@comcast.net.