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Top Performing Stocks of the Last 25 Years
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Eaton Vance stock tops over 25 years
By Kathie O'Donnell, MarketWatch
BOSTON (MarketWatch) - If Warren Buffett is the Oracle of Omaha, maybe James Hawkes, chairman of mutual fund company Eaton Vance Corp, is the Sage of State Street.
Shares of Boston-based Eaton Vance EV -0.59% ranked No.1 among publicly traded U.S. stocks for the 25 years ended Dec. 31, with a 32 percent annualized return. That put the company ahead of both Buffett's Berkshire Hathaway BRK.A +0.02% and Wal-Mart Stores WMT +0.00% in the rankings, compiled by FactSet Research Systems, a Norwalk, Conn.-based financial data provider.
Hawkes recently learned of his company's success at a Merrill Lynch conference he attended with Eaton Vance's chief financial officer. They watched a slide presentation by M&T Bank Corp. MTB +0.84% -- whose stock ranked 11th-- and saw Eaton Vance topping the list.
"There were big smiles on our faces when we saw that," Hawkes said in an interview. "It was one of those 'Holy Batman!' moments."
After Eaton Vance, the best-performing stocks for the 25-year period in order of returns were Kansas City Southern KSU +0.44% , Countrywide Financial Corp. , Progressive Corp. PGR -1.25% , Stryker Corp. SYK -0.25% , National Technical Systems NTSC +0.38% , Forest Laboratories FRX +0.03% , Wal-Mart, State Street Corp. STT +0.81% , Mylan Laboratories MYL -1.70% , M&T Bank, Leucadia National Corp. LUK -0.06% , Allete Inc. ALE +1.23% , Dollar General Corp DG -0.05% . and Berkshire, according to FactSet Research.
Investors who purchased $10,000 worth of Eaton Vance stock on Dec. 31, 1979 - assuming they reinvested all dividends - saw it grow to $10.6 million 25 years later, according to Eaton Vance's 2004 annual report.
A $10,000 investment in the company's flagship Eaton Vance Tax-Managed Growth Fund CAPEX +0.44% , made at year-end 1979, would be worth about $209,000 as of Dec. 31, assuming all distributions were reinvested, according to Morningstar. Of course, the fund invests in a basket of stocks, which diversifies risk but limits the potential for the runaway returns a single stock can deliver.
Tortoise wins the race
Hawkes, who joined Eaton Vance in 1970, has been its president and chief executive officer since 1996, and its chairman since 1997. He said "a lot of different things" helped the company deliver the return for its shareholders. While the company strives to control expenses, a bigger factor in its success is steady progress, the CEO said.
"One of our keys to success is we are a little bit the tortoise in a race with hares," Hawkes said. "We just make progress every year."
Eaton Vance, which managed $94.3 billion in assets at the end of 2004, offers equity, fixed-income and floating-rate bank loan mutual funds and closed-end funds for U.S. and non-U.S. investors. It also offers managed accounts and charitable trusts for U.S. investors only.
"We've got skill sets that will allow us to make progress in environments where equities are in favor, or out of favor, where bond funds are in favor or out of favor," Hawkes said. "If you look at many of our competitors, they do well in certain environments, and then they slow down and don't make progress in other environments."
Eaton Vance, headquartered on Boston's famous State Street, in the middle of its financial district, has also avoided the regulatory thicket that has ensnared many of its rivals. That has allowed it to focus on meeting the goals of the company and its clients, Hawkes said.
The CEO liked his company's performance numbers so much, he put them on the cover of its 2004 annual report, skipping the usual art.
Highlights included a 67 percent increase in net inflows to $13.8 billion and a 26 percent increase in assets under management from 2003. Net income rose 31 percent to $139 million in 2004.
Robert Lee, an analyst at Keefe Bruyette & Woods, said the growth Eaton Vance has shown in assets and earnings over the past 10 years has been "pretty phenomenal, pretty strong."
At the end of 1994, Eaton Vance's assets totaled about $15 billion, the company said.
"They don't necessarily try to be all things to all people," Lee said. "They seem to do things that generally are well thought out and not just 'Hey, this is hot, let's go do it.'"
Hawkes said he was "a little bit surprised" that Eaton Vance topped Warren Buffett's Berkshire Hathaway, but added "I think every company in this universe of 15 has done an extraordinary job for their shareholders."
Hawkes said he was amused by what companies didn't make the list. With the possible exception of some health care or drug firms, no "cutting edge" technology companies made the list, he said. Hawkes added that companies like M&T Bank and Allete aren't "household names."
"I know these companies because I'm in the investment business," the CEO said. "But I bet the average Joe doesn't know what most of these companies do."
Hawkes acknowledged some companies that went public less than 25 years ago have probably outperformed Eaton Vance. Microsoft Corp. MSFT -0.06% did marginally better since its 1986 IPO, posting a 35.6 percent annualized gain.
"Nonetheless, this is a list of companies who were around 25 years ago, and who are still around and have done a great job," Hawkes said.