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Decade’s Hottest Stocks Reflect Hunger for Anything Tech

TIMES STAFF WRITER

The decade of the tech stock? Now there’s an understatement.

The hottest stocks of the 1990s are virtually an all-tech affair, as a list of the top performers compiled for The Times by Ned Davis Research shows.

Just look at Dell Computer Corp.'s decade-leading 91,863% rise, as measured from its closing stock price on the last trading day of 1989 through Thursday.

That means a $5,000 investment in the personal computer maker at the start of the ‘90s would be worth more than $4.5 million today. You could have become a Dell millionaire by putting in only about a grand.

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Ouch.

A $5,000 investment in No. 2 performer EMC Corp., which makes data storage software and equipment, would be worth more than $3.5 million today.

Who knew?

Both of those issues were pretty much penny stocks on Dec. 29, 1989, the last trading day of the ‘80s. Dell went for $5.75 a share (split adjusted: less than 6 cents), and EMC fetched $3.63 (split adjusted: 13.5 cents).

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Microsoft Corp., well known by then but certainly not the preeminent software firm it is today, likewise would have put you in the millionaire camp with a modest investment.

From a split-adjusted $1.21 a share at the end of 1989, the stock today is worth nearly $120 a share. A $5,000 investment in 1989 would be worth nearly half-a-million dollars now.

Of course, much of the advance in Dell, EMC, Microsoft and most other tech stocks has come just in the last two to three years.

Still, in an era when many tech investors like to trade rapidly in and out of stocks, the ‘90s performances show how lucrative a buy-and-hold strategy can be--when you buy the right stock.

Propelled by such superstars--as well as by many new issues that have begun trading in recent years--the technology-oriented Nasdaq composite index has risen 774% this decade, through Monday, while the Dow Jones industrial average has gained 314%.

Including stocks that began trading in this decade, the list of top-performing issues of the ‘90s changes somewhat, given the hot performances of many new issues. Shares of telecom equipment maker JDS Uniphase Corp., for example, are up 28,894% since they began trading in 1993. America Online is up 70,626% since it began trading in 1992.

All told, the ‘90s market blockbusters are on a different scale than ‘80s blockbusters. Most of the ‘80s stars were consumer-oriented and included many retailers. Tech stocks in the ‘80s were largely viewed as a boom or bust investment play; many investors preferred to bet on a continuation of Americans’ conspicuous consumption via names such as Circuit City and Limited Inc.

Circuit City, in fact, topped the list of the hottest stocks in the Standard & Poor’s 500 index in the 1980s. Yet its gain in that decade--8,252%, according to Ned Davis Research--was far below what the best tech stocks achieved in the ‘90s.

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Several of the stars of the ‘80s have continued to perform respectably in the ‘90s. Circuit City is up 681% since Dec. 31, 1989, modest compared with its rise in the ‘80s, but more than double the Dow’s gain.

(Rival electronics retailer Best Buy, meanwhile, has been the 10th best-performing stock in this decade, up 8,900%.)

Other ‘80s stars that have surged in this decade as well include Wal-Mart, up 1,138%; and Gap, up 2,302%.

But two other retailers--department store chain Dillard’s and toy giant Toys R Us--have actually declined in price in the ‘90s after being among the hottest stocks of the ‘80s.

Whether the ‘90s tech stars’ stock gains will be sustained is another question. For now, here’s a closer look at some names that had the potential to make investors super-rich in the decade now ending:

* Dell, the No. 1 stock, found a better way of doing things: selling personal computers directly to consumers either by phone or, more recently, via the Internet.

Chief Executive Michael Dell bet on volume, volume, volume as the company cut PC costs by skipping the middleman and building to order. The increasingly computer-savvy public loved the idea. But as PC unit sales slow, some analysts wonder whether the company can continue to grow at its torrid pace.

* Solectron, the biggest contract manufacturer for the electronics industry and a symbol of Silicon Valley, has, not surprisingly, ridden the Valley’s boom. It takes third place among all stocks in the ‘90s performance derby, up 19,751%.

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* One of the decade’s biggest trends--industry consolidation--has benefited Clear Channel Communications Inc., a network of radio and TV stations whose stock has surged 14,488% in the ‘90s. Though the acquisitive company has grown rapidly, analysts expect more of the same: Per-share earnings are projected to rise nearly 30% annually over the next few years.

* Many of the stocks on the list were puny at the start of the decade--such as computer services specialist Jack Henry & Associates Inc., which traded for $1.87 a share (split adjusted: 40 cents) at the end of 1989 and is up 13,447% since. The company exploited a tech niche: It has grown as banks and other financial institutions hired it to convert data, install software, customize systems and provide follow-up support.

* Microsoft, of course, is synonymous with Windows, the personal computer operating system of the ‘90s. But some analysts now are betting that its free rival, Linux, will be the system of the ‘00s, which is why Red Hat Inc. and VA Linux Systems Inc. are two of the hottest new stock offerings of 1999.

Chief Executive Bill Gates, however, has long kept Microsoft ahead of the curve, and plenty of analysts and investors are betting that it can stay there. At $615 billion, it’s the world’s biggest stock by market value, and the shares have recently taken flight for the umpteenth time, gaining 31% in the last month.

* The ‘90s saw the rise of the individual investor, as average folks started making more of their own investing decisions. Many turned to discount brokerage innovator Charles Schwab Corp. Its stock, in turn, is up 7,343% in the decade.

But with established full-service rivals such as Merrill Lynch Corp. jumping online, and upstart Web sites such as Ameritrade Corp. offering cheaper trades, Schwab now is under attack on all sides. The stock is down 54% from its 1999 peak.

* While the 1990s are to tech stocks what the 1980s were to consumer stocks, retailer Home Depot still managed to place among the top 50 performers of the new decade, with its “category-killer” store format. The stock is up 3,480% in the ‘90s.

* Other top-performing sectors include telecommunications (Tellabs Inc., up 17,084%; MCI WorldCom Inc., up 7,070%) and drugs (Amgen Inc., up 5,208%; Jones Pharmaceuticals Inc., up 2,672%).

The computer chip sector, which has been surging lately, also is well-represented. Applied Materials soared 6,728%, Intel Corp. rose 3,755% and Lam Research Corp. climbed 2,921%.

Bloomberg News was used in compiling this report.

Times staff writer Josh Friedman can be reached by e-mail at josh.friedman@latimes.com.

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‘90’s Winners: Tech All the Way

Led by Dell Computer, technology stocks dominate the list of the 10 best-performing stocks of the ‘90s. This list includes only those issues that traded for the entire period starting Dec. 31, 1989. The top 10 gainers:

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Ticker Price on Percentage Company symbol 12/31/89* gain in ‘90s Dell DELL $0.057 91,863% EMC EMC 0.135 74,577 Solectron SLR 0.461 19,751 Tellabs TLAB 0.391 17,084 Clear Channel Communications CCU 0.619 14,488 Jack Henry & Associates JKHY 0.403 13,447 Semtech SMTC 0.469 10,940 Microsoft MSFT 1.208 9,619 Maxim Integrated Products MXIM 0.516 8,918 Best Buy BBY 0.500 8,900

Thursday Company close Dell $52.31 EMC 101.13 Solectron 91.50 Tellabs 67.13 Clear Channel Communications 90.25 Jack Henry & Associates 54.56 Semtech 51.75 Microsoft 117.44 Maxim Integrated Products 46.50 Best Buy 45.00

*--*

*Adjusted for all stock splits since.

Making a Million: What It Took

It took less than $7,000 invested in any of the top five stocks above 10 years ago to produce a million-dollar holding today--provided you had the patience to hold on. The approximate dollar amount required 10 years ago to equal $1 million today in each stock:

‘80s Winners: Consumer Kingpins

The top stocks of the ‘90s have vastly outperformed the blue-chip stock winners of the 1980s, which were dominated by consumer stocks. The hottest stocks in the Standard & Poor’s 500 index from Dec. 31, 1979, to Dec. 31, 1989:

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Ticker % gain % change Company symbol in ‘80s in ‘90s Circuit City CC 8,252% +681% Limited LTD 6,100 +161 Hasbro HAS 5,582 +228 Wal-Mart WMT 4,032 +1,138 Dillard’s DDS 3,817 --17 Gap GPS 3,694 +2,302 Chris Craft CCN 2,460 +160 State Street STT 2,437 +614 Cooper Tire CTB 2,081 +83 Toys R Us TOY 2,041 --40

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Source: Ned Davis Research

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‘90s Stars, Including New Issues

If stocks that came public after Jan. 1, 1990, are included, the list of the decade’s top stocks is dominated even more strongly by technology companies, as new offerings such as America Online, JDS Uniphase and Qualcomm rank high. The top 20, including 1990s IPOs:

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Ticker Starting % gain Thursday Company symbol price* in ‘90s close Dell DELL $0.057 91,863% $52.69 CMGI CMGI 0.317 85,428 270.81 EMC EMC 0.135 74,577 101.13 America Online AOL 0.115 70,626 81.50 Cisco Systems CSCO 0.155 67,491 104.44 JDS Uniphase JDSU 1.031 28,894 298.06 Solectron SLR 0.461 19,751 91.50 Tellabs TLAB 0.391 17,084 67.13 Veritas Software VRTS 0.963 14,763 143.13 Clear Channel Commun. CCU 0.619 14,488 90.25 Henry Jack & Assoc. JKHY 0.403 13,447 54.56 Price Communications PR 0.218 12,546 27.63 Semtech SMTC 0.469 10,940 51.75 Qualcomm QCOM 4.401 10,499 466.50 Three-Five Systems TFS 0.375 9,717 36.81 Microsoft MSFT 1.208 9,619 117.44 QLogic QLGC 1.625 9,535 156.56 Maxim Integrated Prod. MXIM 0.516 8,918 46.50 Best Buy BBY 0.500 8,900 45.00 NBTY NBTY 0.146 8,000 11.81

*--*

* Close on first trading day

Source: Ned Davis Research

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‘90s Stock Stars: 11 Through 50

Although tech stocks grabbed the top spots (as shown on C1 chart), some consumer names--such as Home Depot and Dollar General stores--are also represented in the 50 top-performing stocks of the ‘90s, meaning those issues that traded for the entire period starting Dec. 31, 1989. All prices are adjusted for stock splits. Here are stocks 11 through 50:

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Ticker Dec. 31, 1989 % gain Thursday Company symbol price in 90s close NBTY NBTY $0.146 8,000% $11.81 American Power Conversion APCC 0.359 7,865 28.63 Xeta XETA 0.438 7,500 33.25 Safeguard Scientifics SFE 2.271 7,430 171.00 Xcelera.com XLA 2.125 7,429 160.00 Charles Schwab SCH 0.457 7,343 34.00 MCI WorldCom WCOM 1.13 7,070 81.00 Techne TECH 0.719 7,048 51.38 Sun Microsystems SUNW 1.078 6,926 75.75 Applied Materials AMAT 1.781 6,728 121.63 Altera ALTR 0.859 5,849 51.13 Linear Technology LLTC 1.297 5,471 72.25 Amgen AMGN 1.021 5,208 54.19 CTC Communications CPTL 0.667 4,822 32.81 Siliconix SILI 2.625 4,645 124.56 Concord EFS CEFT 0.563 4,560 26.25 Oracle ORCL 2.309 4,521 106.69 California Amplifier CAMP 0.562 4,478 25.75 Pre-Paid Legal Services PPD 0.562 4,100 23.63 Comverse Technology CMVT 3.125 4,100 131.25 Thoratec Labs THOR 0.234 4,060 9.75 Optical Coating Lab OCLI 6.875 3,849 271.50 Intel INTC 2.156 3,755 83.13 Micron Technology MU 1.95 3,727 74.63 Intertel INTL 0.688 3,668 25.91 Electronic Arts ERTS 2.281 3,618 84.81 Paychex PAYX 1.141 3,542 41.56 Novellus Systems NVLS 3.438 3,493 123.50 Home Depot HD 2.713 3,480 97.13 Theragenics TGX 0.25 3,350 8.63 Micros Systems MCRS 1.875 3,220 62.25 ADC Telecommunications ADCT 2.297 3,056 72.50 4 Kids Entertainment KIDE 1.125 3,050 35.44 Parametric Technology PMTC 0.875 2,957 26.75 BMC Software BMCS 2.521 2,945 76.75 LAM Research LRCX 3.583 2,921 108.25 Cognos COGN 1.625 2,815 47.38 Dollar General DG 0.81 2,770 23.25 Helix Technology HELX 1.688 2,715 47.50 Jones Pharmaceuticals JMED 1.556 2,672 43.13

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Source: Ned Davis Research


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