Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on
I want to tell you about the most
performers of the past decade. Not the ones with the very best total returns, but the ones that have put up positive results in each of the past 10 years. A lot of the names will confound you, as they are not the sort of glamorous companies that seek out or get a lot of publicity. They just find a way to make money for shareholders, every single year.
According to my calculations, of the 10,000-plus stocks available for purchase today, only 17 have recorded positive total returns in every one of the past 10 years.
In my experience, the stocks with streaks tend to have staying power. At the start of 2005, there were just five stocks with a 10-year winning streak, and they were up 16% on average last year:
Expeditors International of Washington
, up 24%;
( GLYT), up 26%;
Brown & Brown
, up 40%;
, down 8%; and
, down 0.9%.
I'll show you the full list at the start of 2006 in a moment. But first, let's meet a few up close.
Four of the companies on a 10-year winning streak are in the construction-materials business. If you're nervous about housing but want to make sure you don't miss out on gains from what has been a hot sector, these provide a way in with less risk.
, Genlyte Group,
Florida Rock Industries
( FRK) and
have returned 57%, 35%, 35% and 27%, respectively, on average, over the past 10 years. All have naturally put up great numbers in years when the major homebuilders have done well, as in 2003 and 2004. But they have also cruised even when the homebuilders have faltered, as in 1996, 1999 and 2002.
Florida Rock is just what it sounds like: It quarries sand and gravel, which are surprisingly not plentiful even in Florida, and processes cement and concrete, which are in short supply worldwide. It's been growing earnings 20% annually for the past two decades, has 30 years of rock reserves and a bulletproof balance sheet containing $70 million cash, services the fastest-growing state in the nation, pays a 1.7% dividend and is run by its founding family. The shares have recently slumped 20% off their high and look good for newcomers.
Simpson Manufacturing, based in California, makes two humble parts of your house: metal pieces that connect wood and masonry walls to each other, under the Strong-Tie brand name, and vents for gas- and wood-burning stoves, called Dura-Vent. The company has put up 15% to 22% growth for more than a decade, with a stable, reasonable valuation: a price-earnings-multiple range of 11 to 17.
Shares gained only 5% last year, but were up 38%, 55%, 15%, 12% and 16% in the five years prior. In 1996 and 1999, terrible years for homebuilders such as
, Simpson was up 77% and 17%. The stock typically has its best months of the year from now through July, so consider connecting now.
Genlyte, based in Kentucky, designs and manufactures light fixtures and controls for homes and commercial buildings under brand names such as Hadco and Lightolier. It is less dependent on residential construction, as most of its products are sold to commercial builders. According to industry reports, office vacancy rates have fallen nationwide in each of the past seven quarters, with more than half of the major U.S. markets under 14%.
That provides an underpinning for new construction, which forecaster Reis Inc. figures will grow as much as 18% this year in terms of square footage. If Genlyte grows its usual 11% to 15% and earns around $4.12 a share in 2007, then, at its current price-earnings multiple of 17, the stock should hit $70 over the next 12 months. That's up 27% from here. Considering it's done at least that in each of the past 10 years, it seems like a fairly safe bet. Historically, its strongest period of the year is now through the end of April.
SCP Pool is a distributor of swimming pool supplies and equipment; that doesn't sound all that exciting until you realize that pool owners need those supplies every month, rain or shine. As the largest distributor in America, supplying 90,000 products to nearly 50,000 customers -- primarily in the Southwest and Southeast -- it maintains pricing power and controls competition by being an aggressive acquirer of rivals. The pool business is only growing about 5% annually, so SCP Pool has launched a successful effort to buy complementary landscape- and irrigation-products businesses.
Analysts at Sidoti expect SCP Pool's operating margin to expand to 9.2% in 2007 from 8.7% today. That doesn't sound like much, but for a maturing company, it's impressive. Growing income 16% to 20%, SCP Pool's forward price/earnings multiple is just 20. So again, we have a stock that hasn't seen a losing year in the market over the past decade and is still reasonably priced. During the bear market years of 2000-02, SCP Pool gained 74%, 36% and 6%, and then added another 67%, 47% and 17% in the rebound years of 2003-05. With its shares down a bit in the past month, it may be time to dive in to enjoy the next 10 years.
A Small Stumble
Of course, stocks that make a clean sweep of the prior 10 years can stumble in the 11th. But it is fairly rare. One company that was up every year from 1994 to 2004 fell in 2005. But it was down by less by 1%, so I'm including it on the list anyway. That was Graco, a Minneapolis-based maker of fluid-control devices for heavy industry. Its products spray paint on cars, apply lubricants and sealants and leave equipment and buildings with high-pressure washes. The company has grown 15% to 20% for years, with its price/earnings multiple in the 11-to-18 range.
Gross margins are in the 50%-to-55% range, which is fantastic for an industrial manufacturer. That's mostly due to its ability to control costs and maintain pricing power by innovating new products; nearly a third of its sales come from products introduced in the past three years. There's no debt, and the company regularly buys back stock and boosts its dividend.
Three acquisitions slowed the company's results in 2005, but with a new round of products due and the purchases reportedly on track, Graco should make up for lost ground this year. UBS analyst Andrew W. Cash says the market is not giving the company enough credit for its tremendous cash-flow generation, which he thinks will accelerate in 2006 as the cost of improving the efficiency of a newly acquired spray-on foam insulation business pays off. Cash figures the stocks should head toward $60 over the next 18 months, or about 65% higher than the current quote.
Here's the full list.
Nothing is certain in the stock market, but who wants to bet against my view that more than three quarters of the stocks on this list will put up gains again in 2006, no matter what happens to the broad market?
to place your wager; put "Stock Streaks" in the subject line.
At the time of publication, Markman was long Chico's, Simpson Manufacturing and Florida Rock Industries, although positions may change at any time.
Jon Markman, senior investment strategist and portfolio manager at Pinnacle Investment Advisors, is publisher of StockTactics Advisor, an independent weekly investment research service. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback;
to send him an email.