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In the search for investments that we could buy and hold for a long period of time, the past indication of the stock return to investors would be the good measurement. Of course, nobody can predict precisely the future, but the history might repeat itself, in one way or another. In the list of Fortune 500, here are the best four companies which have the highest return to its shareholders over the 10 year period.
Apple (AAPL), the most well-known technology company with its famous brands of full creativity in computers, laptops, mobiles such as Macbook, iPhones, iPods, iPads, etc., along with a portfolio of consumer and professional software applications, the iOS and Mac OS X operationg system. At the end of November 2011, AAPL, as part of a consortium, have acquired Nortel Networks Corporation’s patent portfolio. In 2002, the stock was around $10-$12 per share, and now it is staying at $420 per share, giving the investors the extremely high annualized return of 45.3% over the last 10 years. Currently it was trading at 15.2x earnings, five times the book value, and 10.5x the level of operating cash flow.
The second highest ranking belonged to Cliff Natural Resources (CLF), the producer of iron ore pellets in North American and metallurgical coal, and a supplier of direct-shipping lump and fines iron ore out of Australia. Dated back 2002, the share was trading at only $2 per share, and it has advanced to $110 in 2008, plunging back to only $13 at the bottom of 2009 and advanced again to $100 in the middle of 2011, now the share price is staying at $70 level. Even with that much fluctuation, if any shareholders bought CLF at $2 in the beginning of 2002, and hold it until now, they would realize the compounded annual gain of 42.7% over the 10-year period. At the current level, the market values CLF at only 5.4x earnings, 1.8x book value and the cash flow yield have reached 22.7%.
The third position is the $20.7 billion company providing custom information technology, consulting and business process outsourcing services, named Cognizant Technology Solutions (CTSH). It operates in four main segments: Financial Services, HealthCare, Manufacturing, Retail and Logistics and Other categories including Communications, Information, Media and Entertainment and High Technology. In 2002, its stock price was only $3 - $4 per share. Since then, it kept increasing to $46 until 2007, the it dropped to $16 level in the 2009 bottom, and now the stock is back to nearly $70 level. Long-term investors would have been very satisfied with the annualized return of 37% that CTSH has brought over the 10-year holding period. Right now, CTSH is trading at its five-year average equivalent, of 25x earnings, 5.2x book value and 21.6x cash flow.
Last but not least, HollyFrontier (HFC), formerly Holly Corporation, is an independent petroleum refiner which produces light products such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. As the end of December 2010, it owned and operated three refineries in Mexico, Utah and Tulsa. In the middle of the last year, Holly merged with Frontier Oil Corporation to form HollyFrontier (HFC). Since 2002, it was trading at $2 level, and it reached $37 per the middle of 2010, being back down to $9 in the 2009 bottom and now the stock is staying at $27 level. Any patient investors who were not scared of short-term movement in the price would have realized the 10 year annualized return of nearly 30%. Now HFC is the $5.7 billion company trading at single digit, at 4.5x earnings, 10% above the book value and only 3.2x cash flow.
Disclosure: No position.
About the author:
Money manager into global equities, especially with US and Vietnam markets. CFA level 3 candidate. Lecturer for Stalla - CFA course in Vietnam Visit Anh Hoang's Website
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