INVESTMENT OPINION
The New Nifty Fifty
The "Nifty Fifty" were a group of premiere growth stocks that became the favorites of large institutions in the early 1970s. The conventional wisdom of the time said that no price was too high to pay for many of these incredible enterprises, essentially equating names like Polaroid and Philip Morris with priceless works of art. When the stock market crashed in 1973 and 1974, it took the Nifty Fifty down with it, absolutely dousing the stocks and leaving generations of investors convinced that the approach was completely bankrupt. Given the heights at which those people bought names like McDonald's and Avon at ridiculous multiples, most investors concluded that people had to have lost money. The average P/E for the group was 37.3, more than two times the average P/E of the S&P 500 for the period.
Morgan Stanley came out recently with a New Nifty Fifty, however, and part of its focus is to correct the historical record. Although I do not have the Morgan data handy, I do know that Wharton Professor Jeremy Seigel did some number crunching on the Nifty Fifty in a book called "Stocks for the Long Run" that yielded some surprising results. Between January 1972 and May of 1993, the Nifty Fifty outpaced the returns of the S&P 500. The old Buffett maxim that quality often erases any errors in timing when purchasing a security seems to have held true for many of the Nifty Fifty names. Don't get me wrong -- some of them were dogs over the period. However, the majority generated above average returns.
Morgan's new list of names seems to have more small companies in the mix -- something that could really change the future results. The best performers of the original Nifty Fifty were names like Philip Morris, Gilette, PepsiCo., Merck and Coca-Cola -- all massive, dividend-yielding blue chip stocks. With this one significant caveat, I offer you the current Nifty Fifty according to Morgan Stanley for your edification and amusement.
Abbott Labs, American Brands, American Express, American Home Products, AMP, Atlantic Richfield, AT&T, Automated Data, BankAmerica, Becton Dickenson, Boeing, Bristol-Myers-Squibb, Campbell Soup, Cisco Systems, Citicorp, Coca-Cola, ConAgra, CPC International, Walt Disney, DuPont, Eastman Kodak, Electronic Data Systems, Enron, Exxon, General Electric, General Mills, Gilette, Heinz, Hewlett-Packard, IBM, Johnson & Johnson, Kellogg, Eli Lilly, McDonald's, Medtronic, Merck, Microsoft, 3M, Mobil, Motorola, Oracle, Pepsico, Pfizer, Philip Morris, Procter & Gamble, Sara Lee, Schering-Plough, Texas Insturments, Xerox.
COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> did not disappoint when it reported earnings this morning, beating consensus estimates of $0.28 EPS by four cents. Shares of the software giant rose $5 1/8 to $45 5/8 in heavy trading. The company will be buying back an addition 18.75 million shares, making the total repurchase 75 million., or about 15% of the outstanding shares since 1992.
Rupert Murdoch's NEWS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> announced this morning that it was acquiring NEW WORLD COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NWCG)") else Response.Write("(NASDAQ: NWCG)") end if %>, boosting shares of the Ron Perelman property by $6 5/16 to $21 1/2. This deal now makes News Corp. the largest television broadcasting property in the country, reaching 40% of all homes.
C-CUBE MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CUBE)") else Response.Write("(NASDAQ: CUBE)") end if %> rose $2 1/4 to $28 1/4 today after reporting second quarter earnings of $0.39 per share yesterday, which was in line with consensus expectations. Interested Fools might want to check out the Conference Call Synopsis for more details.
HOME SHOPPING NETWORK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HSN)") else Response.Write("(NYSE: HSN)") end if %> blew through consensus estimates today, reporting earnings of $0.05 EPS versus First Call consensus expectations of $0.01 EPS. The stock is up $1 to $11 1/8.
News that MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %> was going to license ISG INTERNATIONAL's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SISGF)") else Response.Write("(NASDAQ: SISGF)") end if %> Navigator/Bridge product drove shares of ISG up $7/16 to $9 5/8.
SEAGATE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> rose $1 1/2 to $41 3/4 this morning despite reporting disappointing fourth quarter results. The storage technology giant only made $0.92 EPS, versus expectations of a $1.02 EPS in profits. Check out the Fool's Conference Call Synopsis over in Earnings Central.
Perhaps a shareholders' lawsuit filed against KEMET CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KMET)") else Response.Write("(NASDAQ: KMET)") end if %> after the company turned down VISHAY INTERTECHNOLOGY'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VSH)") else Response.Write("(NYSE: VSH)") end if %> offer of a friendly merger is the reason Vishay is up $1 1/8 to $19 1/8 this morning.
MATTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAT)") else Response.Write("(NYSE: MAT)") end if %> rose $2 3/8 to $24 1/2 after an independent accountant stated that the company's books were consistent with the Generally Agreed-Upon Account Practices, also known as GAAP.
STANLEY WORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SWK)") else Response.Write("(NYSE: SWK)") end if %> blew past consensus estimates of $0.42 EPS, reporting $0.49 EPS versus last year's $0.37 EPS. The company announced it was divesting some product segments as part of its restructuring efforts. The stock is up $1 /8 to $28.
KOHL'S CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KSS)") else Response.Write("(NYSE: KSS)") end if %> surged $3 5/8 to $32 3/4 after Smith Barney upgraded the retailer from "neutral" to "buy".
Strong earnings at FOURTH SHIFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FSFT)") else Response.Write("(NASDAQ: FSFT)") end if %> were responsible for the $1 3/8 to $7 3/4 rise in the shares this morning. The company posted results of $0.08 EPS versus $0.06 EPS consensus estimates.
Earnings in line with expectations were enough to cause browser developer SPYGLASS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SPYG)") else Response.Write("(NASDAQ: SPYG)") end if %> to shoot up $3 to $19 3/4 this morning. After posting results of $0.07 EPS versus $0.04 EPS last year, the company pointed out it had been profitable for ten quarters -- unprecedented among the so-called online companies.
DIALOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DLGC)") else Response.Write("(NASDAQ: DLGC)") end if %> beat its numbers by a penny last night, causing shares of the telecommunications equipment concern to rally $2 1/4 to $25 1/2 this morning.
MERIDIAN DATA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MDCD)") else Response.Write("(NASDAQ: MDCD)") end if %> saw second quarter sales of software products explode, fattening gross margins and pushing the stock up $7/8 to $8 1/2 this morning. Earnings were $0.13 EPS compared to breakeven results last year. The company also said that it is comfortable with analyst estimates of $0.52 EPS for fiscal year.
BROWN GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BG)") else Response.Write("(NYSE: BG)") end if %> slumped $1 3/8 to $13 5/8 today after Standard & Poor's announced that the company would be dropped from the S&P 500 Index.
Manufactured home builder SOUTHERN ENERGY HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEHI)") else Response.Write("(NASDAQ: SEHI)") end if %> dropped $1 3/4 to $10 1/2 this morning when it totally flubbed consensus estimates of $0.41 EPS, reporting only $0.29 EPS in the current quarter.
Shareholders of CITATION COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CITA)") else Response.Write("(NASDAQ: CITA)") end if %> are not warming to managements plans to issue 2.6 million more shares, pushing the stock down $2 1/4 to $13 1/4 in short order.
AMTROL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMTL)") else Response.Write("(NASDAQ: AMTL)") end if %> reported flat earnings growth in the current quarter, coming up with only $0.49 EPS this morning. The maker of flow and expansion control technology dropped $3 to $20 3/4.
Momentum investors abandoned networker PREMISYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRMS)") else Response.Write("(NASDAQ: PRMS)") end if %> this morning when it only met consensus expectations of $0.19 EPS for the quarter, dropping shares $6 3/8 to $38 1/2. Perhaps they said something untoward in the conference call?
Big Blue Triangle, better known as AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> slumped $1 5/8 to $31 7/8 after the company announced a large Digital City Inc. venture that includes TRIBUNE CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TRB/A)") else Response.Write("(AMEX: TRB/A)") end if %>. The consumer online service simply cannot find any purchase as it slides down from its 52-week high of $71 a little more than a month ago.
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