Return-on-investment

Precious few individual companies in a portfolio should be held for the very long-term. Only companies that can create shareholder value, increase profits and intrinsic value steadily, and dominate their markets should be considered.

"Great Companies, Great Returns" is a guide to developing a core investing strategy with the highest quality companies. This strategy includes owning companies with household names such as Citigroup, General Electric, and Johnson & Johnson, and is meant to be a viable alternative to indexing.

As Jim Huguet says, "Core strategies differ from other investing strategies in that they are long-term, tax efficient, easy to understand, and proven, and provide excellent returns relative to the level of risk. This differs from "black box" strategies that buy stocks rather then companies, cost you dearly in taxes, and often underperform the market at high levels of risk."

"Great Companies, Great Returns" does define the qualities of "terrific businesses," and then builds the case for a great company though twelve criteria (i.e., "screens"). The book is a primer for anyone who wants a disciplined methodology for identifying and selecting companies for long-term investment.

The twelve screens in the book generated fourteen large capitalization companies. An overview for each of these companies is presented. This "Super Investing" strategy, in the author's opinion, invests in the 14 greatest public companies headquartered in the United States.

The "Great Companies" strategy is also applied to IPO's, international companies, and mostly technology-based "Great Companies of the Future." The author covers, in detail, allocating, managing, and monitoring funds in a "Great Companies" portfolio.

"Great Companies, Great Returns" contains charts, graphs, CEO interviews, worksheets, and a partial listing of helpful web sites.

I've been following this portfolio [as a fund in my Yahoo screens], and I have seen it perform quite well. I bought the book in early 2000. I went back to check the stock performance of each of the companies mentioned since Dec. 31, 1999. and here is a brief history:

Jan - March 2000 "the dot com crash": Portfolio showed weakness as analysts praised new economy and trashed old economy. Portfolio of companies was down about 17%.

March - July 2000: Portfolio gained back its losses as investors returned to blue chip investments.

August - December 2000: Portfolio showed strength as market turned sour and uncertain as election foes killed the markets.

Dec. 31, 2000: Portfolio of 14 companies was up 16%. Not bad compared to NASDAQ and DOW Jones performace.

Year to Date 2001: Portfolio has given back its gains but is showing resilience as of late,

All in all, only down 3% from investment in January 1, 2000.

The book is a great reference for these companies and I agree with the company strengths and weaknesses.

Huguet realizes that many investors are frustrated by the fact that the performance of their investment portfolio is below their expectations. They are often confused about the world of investing. Because they are busy people, they are frequently short of time. Many rely primarily on indexing. Others have just begun their investment journey. They pay too much in taxes. They are concerned about pre-retirement investing. Or they are retired and fear that they will outlive their money. They may be concerned about financing the education of children or grandchildren. "Is there an investment strategy which will produce great returns over the long-term cycle of bull and bear markets?" Huguet asked himself this question and then began rigorous and extensive research to answer it. Great Companies, Great Returns is the result of his research.

Essentially, Huguet concluded that there are certain stocks which every investor should own. Which stocks? He next concluded that there are a few great American companies in which to invest, companies whose stocks will produce outstanding, tax-efficient returns in a variety of market conditions. OK but which Great Companies? He identifies and then explains his selections.

The strategy which Huguet advocates makes compelling sense for those whose long-term investment objectives are to maximize returns while minimizing risks and taxes, and thereby achieving the greatest returns (over time) from publicly-traded stocks. Large-cap companies really do have significant strategic advantages over their smaller-cap counterparts. Of these, Huguet has selected only 14. If a reader of Great Companies, Great Returns has a better combination of traits and/or a better selection of Great Companies in which to invest, Huguet would be delighted to know. (So would I.)

I rate his book so highly for two reasons: Huguet's rationale for long-term investment is sound, and, while explaining his reasons for it, he provides a brilliant analysis of the companies in which he believes such an investment should be made. My guess is that this book will be most valuable to those who need both the rationale and the research in support of it.