Thursday, May 17, 2007

Ten Stocks for the Next Ten Years

[SmartMoney Magazine, May 2007] For our 15th-anniversary issue, we've taken what we've learned over the past decade and a half to create another 10-year portfolio. To identify our top-10 stocks this time, we also demanded a demonstrable history of sales growth. Then, as in past years, we sorted through the remaining stocks one by one, looking for common themes that were likely to play out over the next decade. In the end, we identified four themes: clean water, health, wireless technology and global growth.

Fresh water is becoming an increasingly important commodity. Water-infrastructure and water-treatment companies will clean up as emerging and developed economies build and rebuild their systems.

Tetra Tech (TTEK) is a consulting firm specializing in water-resource management and environmental cleanups.

At first glance, you might not think a company that invented a hot-water valve in the early 1900s would be a high-growth prospect for the next decade. But Watts Water Technologies (WTS), which supplies water-control, purification, safety and flow devices to the construction industry, should see strong gains in the years ahead.

Demographics favor medical-equipment manufacturers, from dental equipment to respiratory care to imaging systems. Natural foods, too, will continue to grow as Americans adopt healthier lifestyles.

Sirona Dental Systems (SIRO). It may be that no one enjoys a visit to the dentist, but health- and appearance-conscious baby boomers are sure going.

Viasys Healthcare (VAS) is a cluster of high-technology medical-equipment and diagnostic companies that focus on respiratory care and neuro diagnostics — the monitoring of the brain and nervous system.

OSI Systems (OSIS) is a hybrid medical/defense company, with half of its revenue from medical equipment and half from scanning and inspection equipment and optical gear used by the defense and aerospace industries.

Wherever you run into organic produce, chances are it got there thanks to United Natural Foods (UNFI). The company is the largest national distributor of organic and natural foods, offering more than 40,000 products from 17 distribution sites nationwide.

As broadband-like speeds come to wireless communications, demand for ever more sophisticated handsets and the infrastructure that powers them will drive the industry's next leap forward.

Powerwave Technologies (PWAV) makes the amplifiers, antennas and other equipment that enable wireless phones and handheld devices to transmit and receive voice and data.

Brightpoint (CELL) is the middleman for the wireless industry and should be ideally positioned to profit from its continued growth.

Globalization is creating new opportunities in areas as disparate as market research and global air transport. Our two picks give investors worldwide reach as the global economy grows.

Best known for its Harris Poll, ubiquitous during American election campaigns since the 1950s, Harris Interactive (HPOL) is one of the top 15 market-research firms worldwide.

Atlas Air Worldwide (AAWW) offers an unusual opportunity to profit from growing global trade, a trend we expect to intensify in the coming decade.

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