Tags: Investments | Stocks | Fad | Value

USA Today: Trendy Investments Can't Hang With Old-Timer Stocks

By    |   Wednesday, 30 April 2014 12:55 PM

Skip the fad stocks and go for the old-timers — stocks which in many cases are over 100 years old, Matt Krantz advises in a USA Today column.

Remember the hula hoop? What does it have in common with hedge funds, real estate, gold and “new economy” stocks? They were all the” next big thing,” notes Krantz.

While fads may be trendy, and even fun, when it comes to returns, Krantz says many of the trendiest investments have underperformed the golden oldies, which in many cases trace their history back to at least 1897.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

He points to research from Ken Winans, market historian, investment manager at Winans Investments, and creator of the WILSI, an equal-weighted index of America's 110 oldest stocks.

The WILSI index, which includes names such as General Electric, Goodyear Tire and American Express, has returned 553 percent over the past twenty years, beating the 427 percent gain of hedge funds, 206 percent gain of gold and 114 percent of unleveraged real estate.

Shorter term, the old-timers also ruled, notes Krantz. The WILSI returned 121 percent over the past five years, trouncing the 55 percent gain of emerging markets, 59 percent gain of hedge funds, 39 percent gain of gold and 18 percent return of unleveraged real estate.

On a price only basis, the WILSI old-timers have lagged tech stocks over the past decade. But investors should be careful about viewing that as a green light for tech, Krantz explains.

Take the the Dow Jones Internet Stock index, it appears to have a stellar performance, having risen 432 percent over the past 10 years, but the index removes dot-coms and tech stocks that died back when the bubble burst, Krantz reminds.

And getting big returns in tech requires investors to endure intense periods of pain and underperformance, he adds. People who jumped into the Nasdaq in 1999, for instance, are up a meager 2.6 percent since then on a price-only basis says Krantz.

Writing for MarketWatch, Philip van Doorn says some of the best stock picks are companies that many investors have never even heard of—and they're old-timers. Think, Middleby Corp. or Badger Meter.

Of 294 companies that are at least 100 years old, 133 of them, or 45 percent, have achieved total returns, with reinvested dividends, exceeding the 505 percent total return of the S&P 500 index over the past 20 years, notes van Doorn.

Investors may be tempted to buy into trendy investments because that's what is shoved in their faces the most. Financial news outlets tend to continually cover the same companies, prompting investors to focus on the short term, writes van Doorn.

But, it really pays to stray from the beaten path because “really old” companies can beat the darlings of today, he says.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

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InvestingAnalysis
Skip the fad stocks and go for the old-timers - stocks which in many cases are over 100 years old, Matt Krantz advises in a USA Today column.
Investments, Stocks, Fad, Value
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2014-55-30
Wednesday, 30 April 2014 12:55 PM
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