(FORTUNE Magazine) – INVESTING 101

Forget about day trading on the Internet. Here's a simple, sure-fire investment strategy: Read FORTUNE's Most Admired survey, buy the stocks of the top ten, beat the S&P. The chart at right is based on a study published in the January-February 1998 issue of Business Horizons. Starting with the 1994 list, FORTUNE calculated what an investor would have gained by holding the stocks of the ten most admired companies for one year subsequent to the publication of each list. As our chart indicates, these portfolios beat the S&P every year but one.

The Top Ten Most Admired

1994

Rubbermaid Home Depot Coca-Cola Microsoft 3M Walt Disney Motorola J.P. Morgan Procter & Gamble United Parcel Service

TOP TEN 25.3% S&P 500 15.6%

1995

Rubbermaid Microsoft Coca-Cola Motorola Home Depot Intel Procter & Gamble 3M United Parcel Service Hewlett-Packard

TOP TEN 24.7% S&P 500 31.0%

1996

Coca-Cola Procter & Gamble Rubbermaid Johnson & Johnson Intel Merck Microsoft Mirage Resorts Hewlett-Packard Motorola

TOP TEN 35.1% S&P 500 18.3%

1997

Coca-Cola Mirage Resorts Merck United Parcel Service Microsoft Johnson & Johnson Intel Pfizer Procter & Gamble Berkshire Hathaway

TOP TEN 56.9% S&P 500 46.1%

1998

General Electric Microsoft Coca-Cola Intel Hewlett-Packard Southwest Airlines Berkshire Hathaway Walt Disney Johnson & Johnson Merck

TOP TEN 19.8% S&P 500 11.4%

MINDING THE STORE

The CEOs of the top ten mostly mind their own business. Five do not serve on the boards of any public company but their own. Those who do tend to have large investments in--or long relationships with--the businesses of which they are directors. For comparison, we looked at outside board activity for CEOs of the top ten FORTUNE 500 companies (not counting GE and Wal-Mart). Most are directors of at least one other company. Only Jacques Nasser of Ford currently doesn't serve on an outside board.

1. JACK WELCH General Electric DIRECTORSHIPS OF PUBLIC COMPANIES: NONE

2. DOUG IVESTER Coca-Cola SUNTRUST, GEORGIA PACIFIC Suntrust, a major Coke shareholder, has had a Coke exec on its board for over 30 years. The bank's predecessor helped take Coke public in 1919.

3. BILL GATES Microsoft ICOS Gates has $142 million invested in this biotech firm.

4. MICHAEL DELL Dell Computer NONE

5. WARREN BUFFETT Berkshire Hathaway COCA-COLA, GILLETTE, WASHINGTON POST Berkshire has $18.6 billion invested in these companies.

6. DAVID GLASS Wal-Mart Stores NONE

7. HERB KELLEHER Southwest Airlines None

8. CRAIG BARRETT Intel KOMAG, US WEST Barrett has been a director of Komag, a leading maker of magnetic thin-film disks, for ten years.

9. RAYMOND GILMARTIN Merck GENERAL MILLS, PUBLIC SERVICE ENTERPRISE GROUP Gilmartin has about $291,000 total invested in these companies.

10. MICHAEL EISNER Walt Disney NONE