I’ve made a remarkable discovery: three stocks with perhaps the most-consistently successful performance this century.
I will tell you their names in a minute. First, I want to give credit where it is due.
Warren Buffett, the "Oracle of Omaha" himself, lured me down the trail of serendipity where I found these stocks. (For more Buffett, see my April story, 8 Ways You Can Use One of Buffett’s Best Strategies).
Among the billionaire’s many nuggets of wisdom, "Warren Buffett likes railroads" is near the top. The leader of Berkshire Hathaway (BRK.A) seems fascinated with trains.
Many investors think this industry hit its prime decades ago … but thanks to Buffett, I noticed a 150-year-old railroad stock repeatedly (and recently!) knocking the cover off today’s ball.
This stock’s year-to-date 23.7% gain impressed me. But I really raised my eyebrows when I saw its 2012 gain of 25.4% … 32.4% in 2011 … and 29.6% in 2009. I never expected such numbers from an industry that was in its prime when my great-grandfather was a little boy!
I immediately wondered if other stocks had that sort of consistency. My trusty computer knew the answer.
Out of about 3,000 "investable" U.S. stocks in the Morningstar database, how many do you think had positive returns in each of the last 10 calendar years plus 2013 to date?
The answer floored me — only three stocks made the cut! I’ve summarized the results for these "marathoners" (as I began calling them) for you below.
One stock goes back 154 years — a decade before the railroad entry checked in — while the third is a relative youngster of only 34 years.
The marathoner stocks are both interesting and diverse. In terms of size, the trio includes one small cap, one large cap and a third somewhere in between.
And more serendipity: The origins of one marathoner include an eerie link to one of today’s most-fashionable tech stocks. (HINT: You’ll have to read this to the very end to find out who it is).
Let’s take a closer look at these consistent winners.
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Marathon Stock # 1: AutoZone (AZO)
The biggest and by far the youngest of our champions started as a single Auto Shack store in Forrest City, Ark., in 1979. Today more than 5,000 AutoZone stores operate in 49 U.S. states plus the District of Columbia, Puerto Rico, Mexico and Brazil.
AZO rewarded shareholders partly by jumping into the tech side of the auto industry. Its ALLDATA division produces diagnostic and repair software for the automotive maintenance industry. On the consumer side, AutoZone has a major online presence with direct sales to customers through www.autozone.com.
The Great Recession was a Great Opportunity for AutoZone. Tightened budgets prompted more car owners to try maintaining their own vehicles. At the same time, slumping new-car sales pushed the U.S. car fleet’s average age higher — meaning more need for replacement parts.
- As a result, uneven-but-positive returns in 2003 through 2007 improved sharply.
- AZO shares vaulted 16.3% in 2008 even as the S&P 500 index crumbled 37%.
- With new-car sales still sluggish and anemic employment gains, AZO stock jumped another 13.3% in 2009.
- AutoZone really stepped on the gas the next year, surging 72.4% in 2010.
- The year 2011 ended with a ho-hum gain of "only" 19.2%.
How is that for a humble spare-parts shop? Now the nation’s top auto supplies retailer, AutoZone is a member of the elite Fortune 500.
Chesapeake Utilities Corp. (CPK)
Born in Dover, Del., in 1859, Chesapeake’s original name was Dover Gas Light Company. Now the company includes regulated energy businesses, and natural gas distribution operations on the Delmarva Peninsula (Delaware, Maryland, Virginia) and in Florida.
Chesapeake also has electric and propane distribution operations in the southern states and an advanced information technology company in Norcross, Ga.
Utility stocks typically show mild but steady returns. This one was anything but mild when it surged 48.8% in 2003 and 33.6% in calendar 2010.
Other years were less-impressive but still on the plus side. No other utility can match CPK’s perfect positive-return record the last ten years.
Westinghouse Air Brake Technologies (WAB)
Back in the 1860s, a young Civil War veteran named George Westinghouse went to work for the railroad industry. Westinghouse Air Brake traces its history to Westinghouse’s compressed-air braking systems for trains, for which he received a patent in 1869.
Better known as "Wabtec," the company has 50 manufacturing plants, service centers and sales offices in the United States, Canada, Mexico, Europe, Asia, Australia and South America. Wabtec serves corporate clients in freight and passenger rail, transit, power generation, off-highway equipment and other industrial applications.
Wabtec’s products include …
- Brake sub-systems and related products for locomotives, freight cars and passenger transit vehicles
- Electronic train-control equipment
- New switcher and commuter locomotives
- Coupling, door control and air conditioning systems for transit vehicles
- Heat-exchange equipment for rail, marine, power generation, off-highway and industrial applications.
The firm also provides locomotive overhauls and fleet maintenance, supplier-managed inventory systems, component repair, upgrade and reconditioning services.
Wabtec is one of two key suppliers to the railroad industry. The other is General Electric (GE). Today the companies have complementary roles; GE manufactures locomotives and WAB provides other hardware and services. Many years ago, they were bitter rivals.
Electricity was a new industry in the 1880s, with George Westinghouse battling against Thomas Edison’s General Electric Company. Westinghouse touted his alternating current (AC) electrical systems as superior to the Edison-developed direct current (DC) systems.
Some say TSLA could become the next Apple.
But being the next Westinghouse Air Brake
wouldn’t be so bad, either!
With help from a Croatian-born electrical genius named Nikola Tesla, who had jumped ship from Edison’s firm, Westinghouse proved the viability of AC, which ultimately became the worldwide standard. Edison wasn’t pleased — but his company survived and prospered, too.
This brings us to the tech stock I teased you with earlier. Like Westinghouse way back in the 1880s, Tesla Motors (TSLA) makes innovative electrical products. The name comes from George Westinghouse’s brilliant associate, Nikola Tesla.
History may not repeat itself … but some of the names do! Maybe TSLA will be a marathon stock itself someday. For now, you know three marathoners. We’ll see if they can keep the streak alive.
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