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The 50 Best Stocks in the World

Second, though cash flow counts more than ever, since finding a new blockbuster drug is more expensive and seems harder and riskier than a decade ago, the competitive advantage provided by Pfizer's industry-leading sales force has slipped behind the advantage it would have if it ran the industry's best research-and-development lab.

The key test facing any drug company for the next decade is developing (and/or buying) enough drugs to:

  • Make up for any patents expiring.
  • Keep the sales force busy.
  • Push up revenue and earnings by the kind of 10% growth that investors in drug stocks still look for.

On its record, Pfizer hasn't been particularly good at turning big research-and-development spending into new drugs. Merck (MRK) used to be the industry's best at research and development, but it has stumbled recently. The crown in that area has passed to Gilead Sciences (GILD), which holds a virtual HIV drug franchise and developed cash cow Tamiflu with Roche Holding. Gilead is also on the verge of adding drugs for hypertension and hepatitis that would significantly broaden the company's product line.

By the way, Gilead is no sluggard when it comes to cash flow either, generating $1 billion in the first half of 2007.

On the basis of those competitive advantages, I'm adding Gilead to this year's 50 Best list and dropping Pfizer.

Four More Drops

The same kind of analysis is behind my four other drops this year:

  • Duke Energy (DUK). The competitive advantage in the utility industry has shifted to companies with big unregulated power-generation businesses that emphasize nuclear and alternative technologies, such as wind power.
  • FedEx (FDX). Global competitors such as United Parcel Service (UPS) have caught up with FedEx, and smaller niche competitors have taken a leaf from the company's book by adding technology to match its logistics capacity.
  • Southwest Airlines (LUV). The low-cost, short-haul model that Southwest pioneered has been adopted so widely that it's not enough of a competitive advantage to justify keeping the stock in this portfolio.
  • Walgreen (WAG). In response to fierce competition, the company has moved away from its core competency of running the best drugstores in the best locations to pursue a strategy built on acquisitions in the pharmacy-services sector.

Five to Add

To balance these five drops, I'm adding Gilead Sciences, as noted above, and:

  • Accor, the leader in the international budget-hotel segment.
  • EMC (EMC), the best in the storage industry at integrating hardware and software.
  • FPL Group (FPL), the leader in the unregulated business of generating electricity from wind in the U.S.
  • Nvidia (NVDA), the last independent graphics-processor company standing.

When I give this list its annual update and revise sporadically during the year, I designate up to 10 stocks that are attractively priced for purchase. As of today, I've got seven stocks that I'd give a buy rating: Accor, Corning (GLW), FPL, Genetech (DNA), Gilead Sciences, Texas Instruments (TXN) and Whole Foods Markets (WFMI).

Below is the complete list of the 50 Best Stocks in the World:


Adobe Systems
(ADBE)
Caterpillar
(CAT)
Genentech
(DNA)
Nokia
(NOK)
Stryker
(SYK)
Accor
(ACRFF)
Chevron
(CVX)
General Cable
(BGC)
News Corp.
(NWS)
Sysco
(SYY)
American Express
(AXP)
Cisco
(CSCO)
GE
(GE)
Nucor
(NUE)
Taiwan Semiconductor
(TSM)
AIG
(AIG)
Citigroup
(C)
Google
(GOOG)
Paccar
(PCAR)
Texas Instruments
(TXN)
Amgen
(AMGN)
EMC
(EMC)
Intel
(INTC)
PepsiCo
(PEP)
Toyota
(TM)
Applied Materials
(AMAT)
FPL Group
(FPL)
IBM
(IBM)
Procter & Gamble
(PG)
Valero Energy
(VLO)
Avon
(AVP)
Coca-Cola
(KO)
Johnson & Johnson
(JNJ)
Qualcomm
(QCOM)
Wal-Mart
(WMT)
AXA
(AXA)
Gilead Sciences
(GILD)
McDonald's
(MCD)
Rio Tinto
(RTP)
Disney
(DIS)
Boeing
(BA)
Corning
(GLW)
Microsoft
(MSFT)
Schlumberger
(SLB)
Washington Post
(WPO)
Broadcom
(BRCM)
Exxon Mobil
(XOM)
Nvidia
(NVDA)
Smithfield Foods
(SFD)
Whole Foods
(WFMI)

At the time of publication, Jim Jubak owned or controlled shares of Corning. He did not own short positions in any stock mentioned in this column.

Jim Jubak is senior markets editor for MSN Money. He is a former senior financial editor at Worth magazine and editor of Venture magazine. Jubak was a Bagehot Business Journalism Fellow at Columbia University and has written two books: "The Worth Guide to Electronic Investing" and "In the Image of the Brain: Breaking the Barrier Between the Human Mind and Intelligent Machines." As an investor, he says he believes the conventional wisdom is always wrong -- but that he will nonetheless go with the herd if he believes there's a profit to be made. He lives in New York. While Jubak cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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