News Analysis date published New: 
Friday, September 7, 2012 - 09:00
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Friday, September 7, 2012 - 09:09
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Friday, September 7, 2012 - 09:00

What I Learned About "The World's 12 Greatest Businesses"

Friday, September 7, 2012 - 9:00am

If at last year's New Year's Eve party you had told me that 2012's five biggest market gainers at mid-August would be a computer hard-drive maker, a wireless carrier, a homebuilder, a clothing retailer and an online travel company, I would have called a cab. For you, not for me.

Yet here they are...

Topping the list of year-to-date gainers in the S&P 500 at mid-week were Seagate Technology (Nasdaq: STX), up 113.3%; Sprint Nextel (NYSE: S), up 113.2%; PulteGroup (NYSE: PHM), up 101.3%; Gap (NYSE: GPS), up 88.3%; and Expedia (Nasdaq: EXPE), up 81.1%.

With gains that large in an economy that's stuck in neutral, these companies are clearly doing something right.

Right?

Not necessarily. As it happens, the share prices for four out of five of these big gainers were lower by an average of 23.8% in 2011 (the fifth rose by 13.2%). In other words, four of the winners at the top of this year's list ended 2011 near the bottom.

But we all know that the market can change on a dime.

What is likely to happen when the market tide shifts, as it always does?

You'll see a new top five, that's what.

For my money, I want to invest in the businesses that will weather storms, not sink in them. What are the stocks that have demonstrated they can stay the course through thick and through thin and back again -- regardless of the market and economic climate?

That's what Top 10 Stocks Chief Strategist Paul Tracy and the researchers at StreetAuthority recently set out to determine. And what they found were a dozen special stocks that not only held their own during all manner of market conditions, but actually thrived.

Paul calls them "The World's 12 Greatest Businesses." These stocks have made some investors wealthier year in and year out, despite the volatility of the past decade. And that performance comes thanks to 11 special traits that Paul has identified and shared with his Top 10 Stocks readers.

Now, none of these 12 business made the "top five" gainers list I discussed above. You aren't likely to wake up, check your portfolio, and see these stocks up 25% overnight.

But neither can many other stocks boast a track record like this:

  • In the 12 months ended June 30, "The World's 12 Greatest Businesses" gained an average of 29.4%... compared with just 5.4% for the S&P 500. The biggest gainer was up 46.7%.
  • In the past five years the S&P was up just 1.1% (dividends included). But while the overall market languished, these 12 stocks returned an average of 68.4% during the same period.
  • And in the past 10 years, they've returned an average of 181.2%... nearly triple the S&P's 68.1% return.

"There are no guarantees," says Paul, but his research shows that "this handful of stocks could be all that investors need to not only beat the market, but steadily and consistently grow their wealth year after year."

Here's more from Paul on these 12 great businesses...

"It started with the July issue of Top 10 Stocks. That month, I added shares of Starbucks (Nasdaq: SBUX)... a company that I believe is one of the world's greatest businesses.

Whenever I talk to new investors, they usually ask me what they should look for in a good investment. I always use Starbucks as an example.

Starbucks sells a product that has global appeal. It sells a product at a premium price. It faces little to no regulation. And Starbucks also returns billions of dollars to its investors via buybacks and dividends.

What was the result of that initial analysis? I came up with a list of 11 traits of great businesses. In addition to the characteristics I just listed, other traits include businesses that sell a product used in day-to-day life... have unlimited growth potential... and have enormous profit margins.

I've compiled the entire list of 11 traits in my latest presentation, which you can read here. I simply don't have the space to list and explain all the traits in detail here.

That said, I'm convinced that these 11 traits are among the greatest indicators of a company's long-term success."

Paul then gave a great example of one of the importance of one of these traits in action: selling a product used in day-to-day life.

Take Kimberly-Clark (NYSE: KMB), for example. The company makes Cottonelle toilet paper, Huggies diapers and Kleenex tissues. All of these products are used every day.

And in the past five years, Kimberly-Clark is up 53%. Moreover, the company has paid dividends for nearly 80 years and has increased payments for 40 straight years.

[Note: Although Kimberly-Clark is a great business, it didn't quite make the cut for Paul's list of The World's 12 Greatest Businesses.]

Action to Take --> As for the ones that did, you can read about them all in Paul's report --The World's 12 Greatest Businesses (there is no video to watch).

Not only will you get the names and ticker symbols of several of the world's greatest businesses in this presentation -- including one that's beating the market 4-to-1 while raising dividends 21% -- you'll also see his entire detailed list of the 11 traits of great companies.

Reading the entire presentation will take a few minutes, but if it helps even one person become wealthier by investing in great businesses, I think it's time well spent. Visit this link to learn more about The World's 12 Greatest Businesses now.

Bob Bogda does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC owns shares of SBUX in one or more of its “real money” portfolios.