BI > APRIL 2003

The Arrows of Ulysses

Catching Rising Stars

The Greek hero Ulysses had a quiver of reliable arrows that served him well in his travels. A closer look at the heritage of the Better Investing Top 100 reveals a quiver of reliability -- a collection of annual favorites that delivered and struck targets over the five years after accumulation by NAIC investors.

Ulysses encountered the nearly invincible Achilles in his travels. Achilles had been dipped in magic waters as an infant and was rendered virtually immune from harm. But the dipper forgot to include the baby's heel in the big dip, and Achilles went forth with a weak spot.

In investing it's often hard to suppress the what-have-you-done-for-me-lately thinking that provides a distraction from the long-term perspective. Achilles could be a sort of patron saint for the Rule of Five, our reminder that despite superhuman research efforts, one of every five selections is destined to get tagged on the heel. Ulysses explained to Achilles that past achievements are soon forgotten, captured in the following passage from Shakespeare's Troilus and Cressida:

Time is like a fashionable host,

That slightly shakes his parting guest by the hand,

And with his arms outstretched, as he would fly,

Grasps in the [rising star]: the welcome ever smiles,

And farewell goes out sighing.

Better Investing Top 100 -- Rising Stars

With all due apologies to Ulysses and Shakespeare, we might argue that history can be a wonderful guide when kept in perspective.

Ken Janke suggests that monitoring the tendencies of the Top 100 can be a source of ideas for stocks to study. He also points out that while the Top 100 represents the stocks most widely held by NAIC investment clubs, it doesn't provide much information about which companies have recently been in favor with the NAIC community. What companies have been accumulated? When?

The accompanying table provides a listing of the companies that advanced the most positions in the Top 100 for every year since 1984. In some ways we've come full circle. This year's No. 1 company, Pfizer, was the most rapidly advancing company for 1984 (in the survey published in 1985). The rising star for 2002 (reported in this month's cover story) was Chico's FAS, soaring from a ranking of 163 a year ago to 49 in the Top 100. This suggests accumulation of Chico's FAS by NAIC investors during calendar year 2002.

Click to enlarge.

The total returns depicted were calculated by taking the average stock price during the year of accumulation and comparing it with the average stock price five years later. The average stock price for Pfizer during 1984 was $17.95. Pfizer's average stock price during 1989 was $32.45. Adding in an average annual dividend of 3.2 percent, the five-year annualized total return for Pfizer was 15.8 percent.

The all-time leader is Intel from 1994, delivering a five-year annualized total return of 54.2 percent. Arrows of Ulysses? Perhaps. There hasn't been a negative result from the quiver yet.

One of life's greatest opportunities is to enable a waking giant, an up-and-comer, a rising star. These Top 100 rising stars have bolstered portfolios for almost two decades. NAIC investors remember the reliable arrows from our quivers that have helped to keep our portfolios on target.

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.