While getting rid of old magazines recently, I ran into a Fortune magazine story from the turn of the century. Titled, 10 Stocks To Last The Decade, the column claimed that investors should bet on four “sweeping” trends that are sure to make money over the next decade: communications networking, entertainment, financial services and biotech. Simply identifying trends isn’t enough (niche ETFs were not available back then), so the magazine was kind enough to talk to hot shot fund managers to identify the following stocks that it said are well-positioned to capitalize on these trends (prices have been adjusted for subsequent stock splits):
Nokia (NOK: 54)
Nortel Networks (NT: $770)
Enron (ENE: $73)
Oracle (ORCL: $37)
Broadcom (BRCM: $118.50)
Viacom (VIA: $69)
Univision (UVN: $56.50)
Charles Schwab (SCH: 36)
Morgan Stanley (MWD: $89)
Genentech (DNA: $37.50)
A reader who followed this advice would have experienced a grievous loss of capital. Some of the stories are well-known: Nortel and Enron went poof! The technology names in the list have all declined substantially. Nokia is today trading at $5, Oracle is trading at $29; Broadcom at $38 and Charles Schwab at $12. Morgan Stanley survived the financial crisis but today trades at just $20. A little bit of financial archeology revealed what happened to the other names:
– The original Viacom split into Viacom Inc. (VIA) and CBS Corp. (CBS). Each share of the old VIA was split into 0.5 shares of VIA and 0.5 shares of CBS. The market value of the original shares today is $43.
– Univision, a Spanish-language broadcaster, went private in an all-stock deal in 2006 for $36.
– Genentech, the only winning stock in the list, was acquired by Roche for $95.
A $10,000 investment in each of these stocks in 2000 when the column was published, for a total of $100,000, would today only be worth $55,600 — a loss of 44% over a 11-year period. In the interest of fairness, it should be pointed out that the S&P 500 is down 10% in price level over the same time period. Granted, I did not bother to include the dividends that some of these stocks paid over the decade because it most likely won’t change the final conclusion: stock picks in magazines may be fun to read but the investment advice may not be worth the paper it is printed on.