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Did I Make You Money?

The editor of Kiplinger's Personal Finance reviews his past recommendations to readers. The performance has been impressive.

To state the title of this chat another way: If I didn't make you money, it wasn't for want of trying. I've just reviewed the performance of stocks and funds I've recommended to you the past three years. Let me explain how they made out and then leave you with a thought.

Super Dow

The people at Barclays and Dow Jones first devised and back-tested an index, then launched an exchange-traded fund based on it: iShares Dow Jones Select Dividend Index (symbol DVY). It's a beaut. The fund held 50 (and now holds 116) of the highest dividend payers in the U.S. Early results were terrific, and I climbed aboard. Since I wrote about it in the June 2004 issue, it has returned an annualized 12.9%, versus 10.3% for Standard & Poor's 500-stock index. I'd be a buyer today.

In December 2004, while bemoaning the closing of several great funds to new investors, I mentioned two terrific "funds of funds" that I thought would serve you well -- Masters' Select Value (MSVFX) and T. Rowe Price Spectrum Growth (PRSGX). The Masters' fund holds the top picks of five celebrated investors in undervalued stocks, including Bill Miller of Legg Mason and Bill Nygren of Oakmark. The T. Rowe Price fund invests in other Price stock funds, holding about one-fourth of assets in overseas stocks. Subsequently, Masters' Select Value returned an annualized 14.2% and Spectrum Growth gained 17.7%, compared with 14.0% for the SP 500. These are funds for all seasons, and I still like them.

I didn't have enough confidence in Google (GOOG) to buy when it went public at $85 a share in mid 2004. But in the January 2005 issue, I said I'd bought shares as a long-term investor in the company, even if its price-earnings ratio seemed ridiculously high. The price when that issue got to you was $182 a share, and on December 11, 2006, it was $484-a gain of 166%. But would I buy Google at today's price? Let me just say that I'm saving my nickels and dimes. Someday, they may pay for another share.


The following month I suggested two railroad stocks that I own: Burlington Northern Santa Fe (BNI) and Kansas City Southern (KSU). Railroads today have pricing power they've lacked for the past century, and I don't see that changing anytime soon. Both KCS and BNSF are up 65% (but the SP, only 11%) since I wrote about them. I'd be a buyer of BNSF (recently $76) at $70 and of KCS ($28) at $24.

Finally, in November 2005 I had three more suggestions: Southwestern Energy (SWN), Norfolk Southern (NSC) and T. Rowe Price New Era fund (PRNEX). I liked that Southwestern was aggressively developing natural-gas deposits in Arkansas at a time of rising prices. The stock, recently at $40, has risen 29% since I wrote about it. But natural-gas futures prices are barely half what they were then. I'd be a buyer at $30. Norfolk Southern, a railroad in the eastern half of the U.S., is up 38%, and my good opinion of it hasn't changed. New Era returned 19%.

I don't own it, but wish I'd taken my own advice back then. The SP 500, by the way, has gone up 13% since that issue went to press.

And a new idea

Look at the five-year price chart for T. Rowe Price Group (TROW) and marvel. What a great business it is in. In the February issue, our David Landis recommends several fund-company stocks as turnarounds. With Price, there's nothing to turn around. So when the stock recently backed off of its high a bit, I was right there as a buyer.