Still a winning bet: 50 Best Stocks

By Jim Jubak

Despite chaos in the financial markets and murky economic trends, the market-beating gains from my 50 Best Stocks in the World portfolio show you can still ignore all that stuff and just concentrate on buying and holding the best stocks.

At least that's the evidence from nine years of this long-term portfolio. Buy and sell just once a year and keep turnover at those annual revisions to just 10%. (That's five buys and five sells out of a portfolio of 50 stocks.)

Then hold -- and count your gains.

The gain on the 50-stock portfolio as of the market close Sept. 20 was 20.66% for the previous 12 months. That beat the 14.83% gain of the Standard & Poor's 500 Index ($INX) and the 18.37% gain of the Nasdaq Composite Index ($COMPX).

And it's worked out just fine during the nine years that I've run this portfolio. For those years, the 50 Best Stocks in the World portfolio is up 70.96% versus a 49.12% gain for the S&P 500 and a 59.74% gain for the Nasdaq Composite.

By the way, you can do even better than this by following macroeconomic trends and picking sectors that benefit from those trends. That's the theory behind my Jubak's Picks, and over a similar nine-year period it has gained 247%. But that style of investing takes more work and time than many people have. And it's a more-aggressive style, with bigger ups and downs, than many investors are comfortable with.

Another alternative is using a buy-and-hold portfolio like the 50 Best as the core of your portfolio and then adding what I call edge positions around that core, to the degree that fits your investing style, time horizon, investing goals and sensitivity to risk.

But if neither alternative fits your needs, it's good to know that you can concentrate on old-fashioned blue-chip-stock picking and still beat the market.

Picking the 50 best

The theory behind the 50 Best Stocks in the World is pretty simple in outline. The goal, as I put it when I started the portfolio in September 1998, was to compile a list of 50 blue chips that earned that often-too-easily bestowed moniker because:

• They had truly outstanding opportunities for global growth ahead of them over the next five or 10 years.

• They had a competitive edge that would allow them to seize the lion's share of that global opportunity. This is critical in the selection process.

Notice there's nothing in that formula that takes account of the ebbs and flows of a sector's popularity. When I pick the best stocks each year and decide which stocks to drop, I'm not looking at sector momentum or trying to guess the direction of economic trends over the next year or five years.

Given all of the short-term information, advice and just plain noise thrown at investors these days -- I'm sure some of my columns contribute to the short-term-data overload -- it's hard to clear your head and concentrate on the long-term fundamentals of a company.

Sizing up Pfizer

Take Pfizer (PFE, news, msgs), a longtime member of the 50 Best portfolio. It's clearly out of favor with investors. The stock's chart stinks: The 50-day moving average has just fallen through the 200-day moving average, which is usually a sign of more trouble ahead.

Wall Street projects Pfizer earnings growth of just 2% in 2007, making the price-earnings ratio of 11.7 on projected 2007 earnings seem wildly inflated rather than a bargain.

Continued: 2 questions to ask

TAGS: STOCKS - INVESTING - JUBAK - PORTFOLIOS - DRUGS

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