Stocks to Love Forever
I can read your mind. Here's yet another sweet nothing of a contrivance about Valentine's Day "investments," you must be thinking. Companies that sell flowers, chocolate, lingerie and hot weekends. Tiffany's. Even Playboy Enterprises. Stocks with trading symbols like LUV and HON. With all deference to LUV -- that would be Southwest Airlines, whose planes do fly me to warm places but whose stock now refuses to get off the ground -- we'll pass on that kind of love theme.
To banish Cupid from your portfolio altogether, there's an apt aphorism: "Don't marry a stock." Unlike some proverbs about investing, this one is righteous. If you own a stock, you shouldn't vow to hold it 'til death do you part. If you do, you'll slow-dance with Wal-Mart and drive into the sunset with Ford, but you won't make much money for old age. In life, loyalty is a virtue. In stocks, it smacks of stubbornness.
That said, every stock picker is entitled to get hitched at least once. I don't own any of these stocks. But maybe someday I'll propose to one:
Goldman Sachs (symbol GS). In December I wrote a Stock Watch column titled Goldman Sachs: Looks Unstoppable. Please read it. Of all the companies that have gone public in the past ten years, this is the one to hug and never let go. It's not too late.
Starbucks (SBUX). In the 1980s, when I wrote what was then called "The Months Ahead" for the magazine formerly known as Changing Times (now it's the "Ahead" section in Kiplinger's Personal Finance), I saw an ad somewhere for this company's mail-order coffee. It was just a local Seattle enterprise but it seemed to have pizzazz. So I chose their experts to interview for a piece about the emerging interest in upscale coffee. I didn't have a clue that Starbucks had a future as a worldwide social phenomenon and a legendary investment, a stock that's turned 67 cents a share at the initial public offering in 1992 (adjusted for subsequent splits) to $33 today.
And Starbucks' novelty hasn't eroded. There's always a line at its stores, I've never seen a location fail, and prices don't seem to matter. I found all three of those points to be true as well in London, where there is feverish competition with Italian espresso and cappuccino shops. A Starbucks interlude costs the same in pounds as it does at home in dollars, meaning twice as much. Yet the coffee, like the rain that sends people inside, never stops pouring.
Steel Dynamics (STLD). I stumbled upon this Indiana company in 2001 while reading an analyst's report prophesying the rebirth of America's steel industry. As someone who became a fan of companies that make coal, steel and heavy equipment when I covered industry and labor for several newspapers in the heartland, I called Steel Dynamics to learn more. They sold me not just on the company but also on the changing steel industry, specifically the emergence of efficient mini-mills that re-use scrap metal. These smart, technologically savvy folks may be accused of dancing on the graves of Bethlehem and other defunct steel makers, but in truth mini-mills prove U.S. companies can still succeed in heavy industry.
Did I add that most employees of Steel Dynamics own stock that and many of them have quietly accumulated impressive wealth? As at Starbucks, where baristas are encouraged to accumulate shares, it's not just the chairman and inner circle who cheer when shares of Steel Dynamics climb. This is a heartwarming story.
Stryker (SYK). Homer Stryker, a Michigan native and contemporary of Babe Ruth, sounds like he could have been a rival of the Bambino's. He wasn't, but the minor league ballpark in Kalamazoo, Mich., is called Homer Stryker Field. Stryker became a doctor and made his mark on both sports and business. He earned 12 medical-device patents, including frames and saws that enabled great progress in reconstructive orthopedics. Stryker has since grown into a world power in hip and knee replacements and surgical tools. Its stock has been virtually without peer, generating a 20-year return of 7,461% (that's 24% annualized).
Stryker executives pledge to achieve earnings growth of 20% every year and, by gosh, the company comes through. The stock occasionally tumbles for a day or two over a regulatory inquiry or some illogical fear that insurance companies won't pay surgeons and hospitals enough for Stryker's implants. Then the well-trained buyers swoop in and the stock goes up all over again.
York Water Company (YORW). For decades I've driven from the Baltimore-Washington area to southern Pennsylvania for bicycling, antiquing, outlet shopping, dining and you name it. As you approach York, Pa., from the south, there's a reservoir called Lake Redman and a sign that says it's the property of the York Water Company. The company's two reservoirs hold the assets: two billion gallons of water, constantly replenished for no cost from up above. That sure beats drilling for groundwater in the desert or, for that matter, hunting oil and gas in Kazakhstan.
But the idea that you can invest profitably in a Pennsylvania pond is a revelation. York Water is one of America's few investor-owned H2O utilities. It has been in shareholder hands since 1816 and has paid dividends continually ever since. I cannot fathom what James Madison would be worth now if he subscribed to the IPO when he was president, but one share purchased in 2000 has nearly quadrupled. When I've asked analysts to explain this marvelous performance, they reply that there are so few publicly traded water companies that if you want to invest in the liquid stuff, you just buy York. Other water companies here and there have done well, but not since 1816. Talk about a long, enduring relationship. They are the very best kind.