I've surveyed the surveys of "best stocks" for 2000 published by various newsletters, business publications and investment professionals. The stocks mentioned most often, the winners, are unsurprising: They're all in the business of moving bits and bytes, waves and signals, across nanospheres and hemispheres.
My project was totally unscientific. I used only sources easily available to me. It's a sampler. But I doubt there would be much dissent about the quality of these companies as investments.
The top picks are Cisco Systems, way out ahead; America Online; Qualcomm; MCI WorldCom; Lucent Technologies; and Texas Instruments.
Cisco's devices are the great connectors of the Internet. Lucent, in addition to doing vast research, makes hardware and software for telecommunications systems. Texas Instruments has reinvented itself into a dynamic developer of cutting-edge digital signal processors and semiconductors that are essential to phones, computers, cars, cameras, modems and high-tech instruments.
MCI WorldCom, through its fiber-optic facilities and global long-distance services, handles an estimated 50 percent of the world's Internet traffic. Qualcomm holds the rights to the protocol--CDMA--that analysts believe will lead us into the future of wireless communications.
And AOL is AOL--"you've got mail."
All are stories of innovation and growth. At the end of the century, they are leaders of an economic and industrial transformation yet in its infancy. I suspect that if you bought a little of each now, in 10 years you'd be a satisfied investor.
But if someone handed me a million dollars with the mission of cashing in on that transformation, these companies would occupy only one corner, the safe one, of the triangular force that 10 years from now will have completed the revolution.
In another corner would be the "business-to-business" Internet companies that are just now beginning to help traditional firms harness communications networks for all aspects of commerce: buying, selling, making, administering and sharing ideas.
The third corner would be reserved for traditional companies, the ones that take greatest advantage of the new technology in the interest of profitability. Just selling products on a Web site isn't enough. The winning companies will be re-engineered, a process well underway.
While there's plenty of money to be made in communications, it's not an end in itself in the larger scheme of industry. Stripped down, it's nothing more than the rapid exchange of information and a nifty medium for transactions.
The greater calling for the Internet in particular is that of catalyst for the rest of the economy, which dwarfs the weight of the Web sector, the cellular-phone sector and everything digital combined.
As a reality check, I keep beside me a statistical review of appliances sold in 1998: There were about 5 million dishwashers, 5 million garbage disposals, 9 million microwave ovens, 9 million refrigerators and--get this--14 million ceiling fans.
The grand total for all appliances was 837,926,796. The number of cell-phone users now, in the whole world, is estimated at 135 million.
Imagine the day--fast approaching--when the company making refrigerators knows precisely how many the market can bear, thanks to the Internet. And thanks to an extranet--a channel between it and everyone on earth who makes refrigerator components--it procures just the right number of parts at the very best price. It makes what it needs and sells what it makes.
This is essentially how Dell Computer does business now.
It is the future for any big manufacturer that wants to grow. Those that adapt best--assuming they have something sellable to sell--will reap huge rewards.
"They will have an enormous opportunity," said Arthur B. Sculley, a partner in Sculley Brothers LLC, an investment firm, and co-author of "B2B Exchanges: The Killer Application of the Business-to-Business Internet Revolution" (ISI Publications).
"They will have a brand name. They will have efficiencies that reduce cost and increase market penetration. They have a tremendous opportunity."
"Nothing has the potential for higher returns in the next five years" than application of the Internet to manufacturing and sales, General Motors Corp. President Richard Wagoner told reporters Friday. He suggested that sometime in the next decade GM may be offering tailor-made cars through a Web site, which is what Dell does now with computers.
For investors, it is relatively simple to identify the promising communications infrastructure companies such as Cisco and the innovators such as Texas Instruments.
Far more daunting will be finding the companies early that are best exploiting these new technologies. Every big company--GE, GM and all the rest--is already claiming rebirth.
This mission will require not only monitoring the share prices of all the blue chips but also a willingness to dig into numbers, keeping track not merely of share price and earnings but also of balance-sheet items such as product cost--how much is spent on materials, labor and manufacturing overhead per refrigerator or per car--and figuring out how this compares with the competition. If you can't read a financial report now, I would strongly urge you to go, for starters, to Merrill Lynch's Web site (www.ml.com) and download "How to Read a Financial Report."
The business-to-business investments may be equally challenging. Indeed, the "B2B" surge is already shaping up as a replay of Internet stock frenzy, with most of the companies involved in reinvention yet to go public.
They come in every imaginable form--providing internal corporate communications, office supplies, billing services, employee benefits and, most important at the moment, more efficient, even revolutionary, systems linking suppliers, manufacturers and retailers.
Some are industry-specific, such as Chemdex Corp. and PlasticsNet and PaperExchange. Some attempt to channel communications in a variety of industries, such as VerticalNet Inc.
Here and elsewhere, you will be hearing more and more about companies such as EarthWeb, Healtheon, PurchasePro.com, and SciQuest.com.
The most publicized deal so far was between a company called Commerce One and General Motors, under which Commerce One will create an online marketplace through which suppliers bid for GM contracts. Commerce One's stock is up roughly 2,000 percent since its initial public offering in July.
Announcements like this are a trickle now. Soon will come the flood. Among the best sources for keeping track of these companies is a magazine called Business 2.0, published by Imagine Media.
The risks and rewards of the next decade will be spread widely, as should your investments. General Motors can't do it without Commerce One, which can't do it without Cisco.
"Over the next five years almost all companies are going to have to reinvent themselves," Sculley said. "It's not a zero-sum game."
(Note: My survey of surveys included the following sources: "Most Promising Buys for 2000" in the Babson-United Investment Report; "2000: The Year Ahead" by Merrill Lynch; "Nine Companies Poised to Change the World" by Gilder Technology Report; "Market Forecast Survey for 2000," Business Week's polling of 50 top analysts; "James Cramer's Stock Dream Team" at TheStreet.com; "The Best Investments for 2000" at SmartMoney.com, "The Best Investments for 2000" in Money magazine; "S&P's Stocks for the Next Century" in S&P Personal Wealth; "Jubak's Journal" at MSN Money Central; "The Growth Portfolio" at Kiplinger.com; and "10 Stocks for the Millennium," in Fortune Magazine. The "winning stocks" were named by six or more sources.)
Fred Barbash (barbashf @washpost.com) is The Post's business editor. Of the stocks mentioned in this article, he is a long-term holder of Cisco and Lucent.