Best Stocks of the 21st Century
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15 Best Stocks of the 21st Century

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Physics tells us that bodies in motion tend to stay in motion. Likewise, some winning stocks just keep on going. And the ones that have excelled through the first 15 years of the 21st century have withstood two of the worst bear markets in history.

To see which businesses worked best in the new millennium—and to judge their potential from here—we looked at the 15 biggest-gaining U.S. stocks since December 31, 1999. What our list of stars shows is that fairly simple business concepts can turn into massive market winners. Most of the 15 names aren't complicated technology companies but rather more-mundane businesses, such as coffee sellers, shoe makers, trucking companies and used-car dealers. What's more, the prospects for many of the companies on our list appear strong enough to support further stock gains in the years ahead—although almost certainly not on the scale of the past 15 years. With each summary, we offer our opinion about whether you should buy, sell or hold.

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Morningstar provided the list of top performers from the end of 1999 through December 10, 2014. Performance was based on total returns—that is, with dividends included. Only companies with current market capitalizations of at least $1 billion are included. The list excludes companies that were acquired over the past 15 years. Results for each stock are through December 31, 2014.

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Best Stocks of the 21st Century | Slide 2 of 16

Keurig Green Mountain

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15-year cumulative total return: +45,714%

15-year annualized total return: 50.4%

Value today of $1,000 investment 15 years ago: $458,144

Stock call: HOLD

The company that helps jump-start millions of Americans every morning did the same for the retirement nest eggs of those who bought in. Coffee retailer and brewer Keurig Green Mountain (GMCR) has been the biggest winner of the millennium so far, with a stunning annualized return of 50.4% over the past 15 years.

With its K-Cup brewing machines in 20 million homes and businesses, the Waterbury, Vt., firm is synonymous with morning joe. In the fiscal year that ended last September, Keurig had $4.7 billion in sales and $597 million in profits, or $3.74 per share. But as hot-drink sales slow, the company will try to conquer a new market by launching a home-dispensing system for cold beverages in late 2015 with partner Coca-Cola (which owns 16% of Keurig). Will the new system beat just reaching for a can of soda? With the stock trading at 31 times estimated year-ahead earnings, the market doesn't see failure as an option.

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Best Stocks of the 21st Century | Slide 3 of 16

Monster Beverage

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15-year cumulative total return: +40,085%

15-year annualized total return: 49.1%

Value today of $1,000 investment 15 years ago: $401,854

Stock call: HOLD

You can't live on coffee and energy drinks, but your portfolio could have. Monster Beverage (MNST) was the second-hottest stock of the millennium, with an annualized return of 49.1%. What started as a juice business in 1935 is now the second-biggest energy-drink firm, after privately held Red Bull. Soaring demand has boosted the Corona, Calif., company's sales from $180 million in 2004 to an estimated $2.4 billion in 2014.

Critics say the caffeine- and sugar-laden drinks Monster and its peers sell are unhealthy and that they are aimed at children (which Monster denies). But growth expectations remain robust. Analysts, on average, see earnings per share rising 22% this year, after a 35% increase in 2014. Coca-Cola couldn't beat 'em, so it joined 'em, taking a 16.7% stake in Monster last summer. That helps support a lofty price-earnings ratio of 34, based on expected 2015 earnings. If you want in, you'll have to pay up.

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Best Stocks of the 21st Century | Slide 4 of 16

Medivation

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15-year cumulative total return: +14,389%

15-year annualized total return: 39.3%

Value today of $1,000 investment 15 years ago: $144,887

Stock call: SELL

Wall Street's love affair with biotechnology over the past decade has created many huge winners, and one of biotech’s biggest stars has been Medivation (MDVN). The San Francisco company's shares have rocketed the past three years, thanks to its first commercial drug, Xtandi, a treatment for certain kinds of prostate cancer. Xtandi's instant success turned Medivation profitable overnight. The company is expected to have earned $2.67 per share in 2014, and analysts see profits rising 24%, to $3.30, in 2015.

The company's niche is research into diseases for which few treatment options exist. But so far, Xtandi is Medivation's only commercial product. Analysts at investment firm Cowen & Co. urge caution. They think Xtandi is a great drug but expect Medivation's earnings to hit a near-term peak in 2015—and they say that the stock, now $100, is overvalued by about 60%.

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Best Stocks of the 21st Century | Slide 5 of 16

Middleby

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15-year cumulative total return: +10,807%

15-year annualized total return: 36.7%

Value today of $1,000 investment 15 years ago: $109,069

Stock call: HOLD

Consumers' ever-shifting food tastes make restaurants a dangerous business. Some investors have found a better way to get a piece of the action: Middleby Corp. (MIDD), which supplies restaurants and home cooks with an array of equipment, including ovens, frying systems and freezers. The Elgin, Ill., firm's growth has been amazingly consistent over the past decade as it has pursued a host of acquisitions to build its stable of brands, including Viking, U-Line and Concordia. Middleby's success has translated into an annualized stock return of 36.7% since 1999.

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Investment bank BB&T Capital Markets says Middleby's strategy in part centers on designing equipment that makes restaurant food handling and cooking more efficient, providing cost savings for the highly competitive industry. The company was expected to have earned $3.41 per share in 2014 on $1.6 billion in sales, and analysts see profits rising by 18%, to $4.03 per share, in 2015. At 25 times estimated 2015 earnings, the stock isn't cheap, but it's a great idea to have on your wish list should its share price pull back.

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Best Stocks of the 21st Century | Slide 6 of 16

Deckers Outdoor

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15-year cumulative total return: +10,305%

15-year annualized total return: 36.3%

Value today of $1,000 investment 15 years ago: $104,046

Stock call: BUY

Investors in footwear maker Deckers Outdoor (DECK) have had to endure some gut-wrenching volatility in sales and stock prices since 1999, but the reward for sticking it out has been an annualized return of 36.3%. Deckers's success stems from its wildly popular Ugg brand boots and shoes, which account for more than 80% of its $1.9 billion in annual sales.

Doubters thought that eventually Ugg would fall victim to the whims of fashion, but it hasn't happened yet. In fact, Ugg has been the most-searched gift term on Cyber Monday (the Monday after Thanksgiving) for the past three years. Analyst Sam Poser at brokerage Sterne Agee sees the Goleta, Calif., company maintaining its momentum. He predicts earnings of $5.08 per share for the fiscal year that ends in March 2015 and $5.98 in the March 2016 year, and he figures that a P/E of 18 based on this year’s profit isn't too much to pay for that kind of growth.

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Best Stocks of the 21st Century | Slide 7 of 16

Terra Nitrogen

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15-year cumulative total return: +8,445%

15-year annualized total return: 34.5%

Value today of $1,000 investment 15 years ago: $85,446

Stock call: HOLD

Few investors—mostly those seeking high income—would have had much reason to pay attention to Terra Nitrogen (TNH) over the past 15 years. But those who invested in the firm deserve bragging rights. The Deerfield, Ill., company, set up as a master limited partnership, produces nitrogen fertilizer products. It rode the commodity boom in the middle of the last decade, then benefited again from 2010 to early 2012 as the price of natural gas, a key raw material in nitrogen fertilizer production, plunged. Investors not only saw their shares soar but also earned hefty regular dividends from the partnership, because it pays out almost all of what it earns.

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Since 2012, however, Terra's fortunes have reversed as fertilizer prices have declined, pulling sales, profits and dividends down as well. The stock has returned 34.5% annualized since 1999, but it has plunged 65% since early 2012. A global economic revival could boost Terra's outlook. But this one is best left for investors who have a strong sense about the direction of fertilizer and natural gas prices.

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Best Stocks of the 21st Century | Slide 8 of 16

Tractor Supply

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15-year cumulative total return: +8,109%

15-year annualized total return: 34.2%

Value today of $1,000 investment 15 years ago: $82,086

Stock call: HOLD

Who knew that serving the "rural lifestyle" consumer could be so lucrative? Tractor Supply's (TSCO) retail niche has been a spectacular winner since 1999, and its shares have gone up by an annualized 34.2%. Its 1,361 stores in 48 states sell farm, ranch and garden supplies to the so-called gentleman farmer, as well as to tradesmen and small businesses.

This seemingly mundane business generated estimated sales of $5.7 billion in 2014. Meanwhile, the Brentwood, Tenn., company’s earnings have jumped from 55 cents per share in 2008 to an estimated $2.61 in 2014. Sales slowed in the first half of 2014, but brokerage Raymond James sees the firm reclaiming its status as one of the "premier top-line growth stories" among retailers of durable goods, capable of delivering profit growth in the mid-teen percentages through at least 2016.

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Best Stocks of the 21st Century | Slide 9 of 16

Clean Harbors

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15-year cumulative total return: +7,588%

15-year annualized total return: 33.6%

Value today of $1,000 investment 15 years ago: $76,880

Stock call: HOLD

Clean Harbors (CLH) looks like a great business that overreached and now is trying to refigure its future. For most of the past 15 years, the Norwell, Mass., company was a strong player in the difficult industry of environmental cleanup. From 2004 to 2012, sales rose from $643 million to $2.2 billion, and the bottom line went from a loss of 65 cents per share to a profit of $2.40.

But in 2013, the company went deep into debt to buy Safety-Kleen, paying $1.2 billion for the recycler and refiner of used oil. Clean Harbors has been struggling since. It was expected to have earned just $1.42 per share in 2014. Although the stock has returned an annualized 33.6% since 1999, it has sunk 32% since its peak in 2012. Brokerage Wedbush Securities thinks investors are undervaluing the better parts of company. But with crude prices diving, slashing what Safety-Kleen gets for its oil, the market isn't listening.

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Best Stocks of the 21st Century | Slide 10 of 16

HollyFrontier

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15-year cumulative total return: +7,237%

15-year annualized total return: 33.2%

Value today of $1,000 investment 15 years ago: $73,370

Stock call: SELL

The shale-oil boom had HollyFrontier (HFC) in a sweet spot for a while. The crude refiner—formed by a merger of Holly Corp. and Frontier Oil in 2011—operates five refineries in the nation's heartland, close to areas where drilling has zoomed. In 2012, the merged company saw revenues top $20 billion and profits hit $8.38 per share. By early 2013, the stock was nearing $60. (The long-term record is based on the performance of the stock of Holly Corp. shares.)

But earnings took a sharp hit that year, in part because of heavy maintenance costs. Now, some analysts see a different problem for the Dallas-based company: rising refinery capacity worldwide, even as oil prices crash. Wells Fargo Securities in December slashed its 2015 earnings estimate for HollyFrontier from $4.63 per share to $2.85. The company continues to pay fat dividends, but in the short term the share price seems likely to stay under pressure.

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Best Stocks of the 21st Century | Slide 11 of 16

Lannett

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15-year cumulative total return: +5,957%

15-year annualized total return: 31.5%

Value today of $1,000 investment 15 years ago: $60,565

Stock call: HOLD

Lannett Co. (LCI) was a marginally profitable player in the generic-drug industry for most of the past 15 years. That changed about two years ago, as the Philadelphia firm began a rapid expansion program. Sales surged from $123 million in the fiscal year that ended in June 2012 to $274 million in the June 2014 year; earnings jumped from 14 cents per share to $1.98. Since 2012, the stock has catapulted from about $5 to a 2014 high of $59.

Lannett has been in the right place at the right time with generic drugs for pain management and for thyroid and cardiovascular problems, and a lack of competition has allowed the company to boost prices. But that leverage will wane as competitors move in. Coming up with new products will be critical. Investment firm Craig-Hallum says that Lannett has filed 21 applications for new generic drugs with U.S. regulators. The shares have slumped to $42 recently because of jitters about future growth. But if key approvals come soon enough, the stock's momentum could reignite.

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Best Stocks of the 21st Century | Slide 12 of 16

Cal-Maine Foods

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15-year cumulative total return: +5,739%

15-year annualized total return: 31.1%

Value today of $1,000 investment 15 years ago: $58,388

Stock call: BUY

Breakfast has become a key battleground in the fast-food industry, and that has been a boon for Cal-Maine Foods (CALM), the biggest U.S. egg producer.

The Jackson, Miss., firm's annual egg sales topped 1 billion dozen in the fiscal year that ended last May. In dollars, sales jumped 12% for the year, to $1.4 billion. The company earned $109 million, or $2.26 per share, up 62% from the previous year's profit. The results have helped drive the stock to record highs, contributing to an annualized gain of 31.1% since 1999.

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For now, Cal-Maine is benefiting from rising demand, higher prices and the trend toward specialty products, such as organic and free-range eggs. But the company has warned that, as with any commodity, egg supplies and prices can be volatile. Indeed, the stock slid in late December as results for the quarter that ended in November came in shy of expectations. Longer term, though, Cal-Maine's ability to buy up smaller rivals, boosting its market share, make the stock an intriguing food-industry play at 13 times estimated year-ahead earnings.

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Best Stocks of the 21st Century | Slide 13 of 16

CarMax

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15-year cumulative total return: +5,657%

15-year annualized total return: 31.0%

Value today of $1,000 investment 15 years ago: $57,570

Stock call: HOLD

Many of the stocks on our list have had long stretches of hefty gains. CarMax (KMX), primarily a dealer of used cars, has had a much more volatile ride, testing shareholders' endurance. But those who stuck it out have racked up an annualized gain of 31% since 1999. The Richmond company's "no-haggle" policy has been a big draw for car buyers at its 143 stores. Earnings, expected to be $2.60 a share in the fiscal year that ends in February 2015, have doubled since 2009. Annual sales are nearing $14.3 billion.

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But selling cars is a highly cyclical business, which may cause many investors to blanch at the stock's P/E of 26 (based on current-year estimates). Another cautionary note: In 2013, CarMax began an in-house test program to lend directly to subprime (that is, high-risk) buyers. Still, investment bank William Blair thinks CarMax is "one of the best long-term investment ideas in retail."

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Best Stocks of the 21st Century | Slide 14 of 16

Gilead Sciences

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15-year cumulative total return: +5,473%

15-year annualized total return: 30.7%

Value today of $1,000 investment 15 years ago: $55,726

Stock call: BUY

Gilead Sciences' stock (GILD) has been every bit a blockbuster as its main products, which include a suite of drugs to treat HIV and its Sovaldi and Harvoni drugs to treat hepatitis C. The San Francisco-based company was expected to have posted 2014 sales of $24 billion and earnings of $7.95 per share. Its stock has soared an annualized 30.7% over the past 15 years, a gain that includes the price tripling from the end of 2012 to October 2014.

Lately, though, there has been a backlash against the high prices of Gilead's drugs, and that has slammed its shares and raised questions about profit growth in 2015. But as the stock's P/E slides toward single digits, it's giving gutsy investors a chance to pick up one of biotech's stellar franchises on the cheap.

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Best Stocks of the 21st Century | Slide 15 of 16

Old Dominion Freight Line

Courtesy Old Dominion Freight Line

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15-year cumulative total return: +5,385%

15-year annualized total return: 30.6%

Value today of $1,000 investment 15 years ago: $54,848

Stock call: BUY

Old Dominion Freight Line (ODFL) has built an investor's dream of a business by following an old strategy: Do one thing, and do it well. The Thomasville, N.C., firm is a less-than-truckload (LTL) freight line, meaning that it typically carries many different shipments in each load. With the founding Congdon family still in charge after 80 years, Old Dominion retains many hallmarks of a private business. That has paid off for shareholders, who've seen their stock gain an annualized 30.6% over 15 years.

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Brokerage KeyBanc Capital Markets calls Old Dominion "the best-run LTL carrier" and sees ample room for growth. The company’s share of the industry is less than 7%, and Old Dominion says it wants to boost that figure to low double-digits. The company was expected to have posted record earnings in 2014 of $259 million, or $3.01 per share, on sales of $2.8 billion. Analysts see profits expanding by 19% this year, to $3.58, putting the P/E at a reasonable 22.

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Best Stocks of the 21st Century | Slide 16 of 16

Cantel Medical

Courtesy Cantel Medical

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15-year cumulative total return: +4,605%

15-year annualized total return: 29.3%

Value today of $1,000 investment 15 years ago: $47,053

Stock call: HOLD

Stories of "superbugs" causing severe infections in hospitals and other medical facilities have put a premium on disease prevention. That has been good for Cantel Medical (CMN), which makes a host of products that kill germs or keep them at bay—disinfectants to clean endoscopes, for example, as well as dialysis water-purification systems and disposable face masks.

Few Wall Street firms cover the Little Falls, N.J., company, so kudos to those investors who discovered this gem, which returned 29.3% annualized over the past 15 years. The stock has been especially hot since mid 2011, rising from $10 to a recent $45. The company earned $1.04 per share in the fiscal year that ended in July, twice what it made in the July 2011 year. Over that period, annual sales climbed 52%, to $489 million. Cantel has proved itself as a growth business, but with a P/E of 37 it now may be too rich for some investors' tastes.

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