Update THE SEVEN STOCKS WE CHOSE AS OUR BEST BETS FOR 2003 FARED WELL, RETURNING 12.8%, YET STILL TRAILED THE REBOUNDING S&P 500 INDEX
(MONEY Magazine) – The performance of our 2003 selections in many ways mirrored the roller-coaster ride investors took this year. They fell when the stock market plummeted in the spring and took off when the market surged. The final tally is as follows: Our picks notched an average total return of 12.8%--respectable, but not up to Standard and Poor's 500-stock index's 16.6% total return. Here's the stock-by-stock rundown on what to do.
Altria Group (MO)
The stock of the company once known as Phillip Morris turned in the most smokin' performance of our picks, returning a jaw-dropping 47% after finding itself down 11% at our midyear update. The reversal of a $145 billion class-action judgment against big tobacco convinced investors that the company merited their capital. Altria fortified this by increasing its dividend by 6.3%, to $2.72 a share. And with its tobacco business back on course, Altria expects to meet 2003 profit targets.
Dell Computer (DELL)
The PC titan was another solid performer, gaining 21%. Sales grew 18% to $40 billion over the past 12 months as Dell continued to take share away from computer-making rivals and showed that it can successfully compete in new markets such as flat-screen televisions and digital music players.
With a return of 15%, the consumer-products titan learned something very important in 2003: When a blackout renders 50 million people without power, the battery business is good. Third-quarter earnings per share hit record levels with strong Duracellsales. But with competition heating up in the razor business, itmight be time to take profits.
Northern Trust (NTRS)
At one point, Northern Trust, a bank that caters to the wealthy, looked as if it would be our biggest stinker. Yet the Chicago bank emerged as one of the best performers. Northern Trust's stock gained 15%, as the company posted its first profit increase in nearly two years thanks to increased assets under management reaching record levels.
Considering Wyeth's travails, we're fortunate that it returned 5%. Still mired in ongoing fen-phen lawsuits, the drugmaker set aside $2 billion in October to cover settlements and litigation. Meanwhile, sales of its female hormone-replacement drugs have slumped, and the company temporarily halted the shipping of children's vaccine Prevnar in November. What's kept the stock afloat? Wyeth says it has five products that will register sales of more than $1 billion each for the year. We'll pocket our gain and move on.
Northrop Grumman (NOC)
Despite posting profits and winning government contracts, the defense juggernaut saw its stock slip 3%. The company is still digesting its acquisition of TRW. The shares of defense companies do well in election years, so Northrop's stock should start to prosper.
Hewitt Associates (HEW)
Hewitt is our biggest laggard, falling 11% for the year. After lowering its annual earnings forecast in May due to shrinking corporate consulting budgets, the human-resources consultant's shares took a 20% tumble. Since then it has somewhat recovered, as fourth-quarter profits doubled. With a resurgent economy, consulting budgets will increase, and so should Hewitt's shares. --Jonah Freedman