Nifty Fifty Stocks: Historical Performance Since 1971

In 1971, The Morgan Guaranty Trust created a list of 50 stocks dubbed the “Nifty Fifty” that could be purchased and then held for the rest of one’s lifetime. The valuation at the time of the list’s creation was unfortunate–it was analogous to making such a list in 1998 or 1999 at the height of dotcom mania. Many of the P/E ratios were extreme for large companies.

Burroughs and Simplicity had such a near collapse of shareholder wealth that it effectively wiped out shareholders even if it didn’t include a formal bankruptcy. Polaroid, and Kresge which became K-Mart, did go bankrupt. The shareholders of Emery and Eastman-Kodak were each tossed a lifeline, as Emery had part of its assets become UPS stock and Eastman-Kodak spun-off Eastman Chemical that is still solvent and growing to this day. Schlitz Brewing shareholders got bought out by the Stroh family in 1982, which was a blessing because they eventually ran into huge debt problems and had to take a substantial loss when selling the remaining assets to Pabst in 1999. I am unsure what happened to MGIC. It may have either compounded for 21% between 1971 and 1981 if it received a cash-out offer from Baldwin-United, but if it became Baldwin-United stock, it would have gone bankrupt and resulted in a 100% loss.

J.C. Penney and Avon basically gave investors returns around the inflation rate.

All in all, it was 2 corporations that didn’t compound your wealth, and 2-3 that went bankrupt depending on what happened to MGIC in 1981. Also, the positive contributors were so extreme that it thoroughly offset any losses from the 4-5 failures (e.g. Wal-Mart alone turned $1,000 into $1.7 million).

These were the results through the present day:

Polaroid went bankrupt in 2008. (1971 P/E ratio was 94.8x earnings).

Baxter International (BAX) has spunoff Baxalta (BXLT) and has compounded at 11.0% annually. (1971 P/E ratio was 71.4x earnings).

Disney (DIS) compounded at 12.5% annually. (1971 P/E ratio was 71.2x earnings).

McDonald’s (MCD) compounded at 15.7% annually. (1971 P/E ratio was 71.0x earnings).

International Flavors & Fragrances (IFF) compounded at 11.1% annually. (1971 P/E ratio was 69.1x earnings).

MGIC Investment Corp got overtaken by Baldwin-United for $1.2 billion in 1981, and although MGIC prospered, Baldwin-United took on so much debt to fund the acquisition that it filed for bankruptcy and auctioned off the MGIC assets. I couldn’t find the early 1980s records on how Baldwin-United paid for the transaction. If it were stock, the MGIC shareholders would have been entirely wiped out (it eventually went public in 1991 with a new shareholder base that exists to this day). If there were a cash payout, MGIC shareholders would have achieved over 21% annual returns from 1971 through 1981, and the Baldwin United Shareholders would have assumed the entirety of the bankruptcy wipeout. (1971 P/E ratio was 68.5x earnings).

Avon Products (AVP) has compounded at 2.0% annually. (1971 P/E ratio was 61.2x earnings).

Johnson & Johnson (JNJ) has compounded at 11.7% annually. (1971 P/E ratio was 57.1x earnings).

Digital Equipment Corporation, which became Compaq and now Hewlett-Packard (HPQ) and Hewlett-Packard Enterprise (HPE), has compounded at 8.3% annually. (1971 P/E ratio was 56.2x earnings).

Emery Air Freight Corp. became part of the eventually defuct Emergy Worldwide, eventually bankrupt Emery Airlines, and also Menlo Worldwide which got acquired by UPS (UPS). Counting the surviving shares, shares compounded at 6.5% annually. (1971 P/E ratio was 55.3x earnings).

Simplicity Patterns was acquired by Conso in 1998; it had compounded at a rate of -0.8% annually. (1971 P/E ratio was 50.0x earnings).

S.S. Kresge became K-Mart and went bankrupt in 2002. (1971 P/E ratio was 49.5x earnings).

Shering Corp. became Merck (MRK) and has compounded at 11.7% annually. (1971 P/E ratio was 48.1x earnings).

American Hospital Supply Corp. merged with Baxter International in 1985. It compounded at 12.7% annually from 1971 through 1985, and 11.5% annually since becoming Baxter (BAX) as well as Baxalta (BXLT). (1971 P/E ratio was 48.1x earnings).

Black & Decker (SWK) became Stanley Black & Decker after a merger with Stanley Works and has compounded at 11.3% annually. (1971 P/E ratio was 47.8x earnings).

Coca-Cola (KO) has compounded at 12.0% annually. (1971 P/E ratio was 46.4x earnings).

Burroughs Co. became Unisis (UIS) and has lost 92% of its value, for a negative compounding rate that amounts to -6.32% annualized. (1971 P/E ratio was 46.0x earnings).

Xerox (XRX) has compounded at 4.1% annually. (1971 P/E ratio was 45.8x earnings).

Schlumberger (SLB) has compounded at 7.3% annually. (1971 P/E ratio was 45.6x earnings).

Eastman Kodak spun-off Eastman Chemical (EMN) while the parent later went bankrupt; the shares compounded at 5.2% as Eastman Chemical’s compounding eventually provided positive returns for the 1971 Eastman Kodak investor. (1971 P/E ratio was 43.5x earnings).

Merck & Co. (MRK) has compounded at 11.9% annually. (1971 P/E ratio was 43.0x earnings).

AMP Inc. eventually became TE Connectivity (TE) and has compounded at 9.9% annually.(1971 P/E ratio was 42.9x earnings).

Eli Lilly & Co. (LLY) has compounded at 9.8% annually. (1971 P/E ratio was 40.6x earnings).

Schlitz Brewing was bought by Stroh brewing in 1982 for a cash payout after 11.2% annual compounding; this cash payout as part of privatization was a blessing as the Stroh family drove it to bankruptcy and sold it to Pabst in 1999. (1971 P/E ratio was 39.6x earnings).

Texas Instruments (TXN) has compounded at 9.9% annually. (1971 P/E ratio was 39.5x earnings).

Cheesebrough Ponds Inc. became Unilever (UL) and has compounded at 10.2% annually. (1971 P/E ratio was 39.1x earnings).

Minnesota Mining & Manufacturing (MMM) renamed its 3M Company and has company at 10.0% annually (1971 P/E ratio was 39.0x earnings).

Upjohn Co. now consists of Pfizer (PFE), Zoetis (ZTS), and Monsanto (MON) stock that have collectively compounded at 15.8% annually (1971 P/E ratio was 38.8x earnings).

American Express (AXP) has compounded at 9.1% annually. (1971 P/E ratio was 37.7x earnings).

American Home Products Corp. became Wyeth and then Pfizer (PFE) for a total compounding rate of 12.7% annually. (1971 P/E ratio was 36.6x earnings).

International Business Machines (IBM) compounded at a rate of 7.5% annually. (1971 P/E ratio was 35.5x earnings).

Halliburton (HAL) has compounded at 7.5% annually. (1971 P/E ratio was 35.5x earings).

Lubrizol is now Berkshire Hathaway (BRK.A, BRK.B) and has compounded at 14.7% annually. (1971 P/E ratio was 32.6x earnings).

Anheuser-Busch had a cash out of $70 per share in 2008; it had compounded at 10.7% annually. (1971 P/E ratio was 31.5x earnings).

J.C. Penney (JCP) has compounded at 3.3% annually. (1971 P/E ratio was 31.5x earnings).

Squibb Corp. became Bristol-Myers Squibb (BMY) and has compounded at 12.8% annually. (1971 P/E ratio was 30.1x earnings).

Wal-Mart has compounded at 18.6% annually (1971 P/E ratio was 29.9x earnings).

Procter & Gamble (PG) has compounded at 11.0% annually. (1971 P/E ratio was 29.8x earnings).

Heublein is now Reynolds (RAI) which has compounded at 17.3% annually. (1971 P/E ratio was 29.4x earnings).

Sears Roebuck has become Morgan Stanley (MS), Discover Card (DFS), Allstate (ALL), Sears Canada (SRSC), Lands’ End (LE), Sears Holdings (SHLD), and Seritage (SRG). Collectively, it has compounded at 10.5% annually. (1971 P/E ratio was 29.2x earnings).

Pfizer (PFE) has compounded at 11.8% annually. (1971 P/E ratio was 28.4x earnings)

PepsiCo (PEP) has compounded at 13.0% annually. (1971 P/E ratio was 27.6x earnings)

Louisiana Land & Exploration became Burlington Northern and then Berkshire Hathaway (BRK.A, BRK.B), and has compounded at 13.1% annually. (1971 P/E ratio was 26.6x earnings).

Revlon was sold to Pantry Pride at $58 per share in 1985; it has been brought public again, but the 1971 shareholders were paid off in cash in 1985. Revlon compounded at 7.5% annually from 1971 through 1985. (1971 P/E ratio was 24.9x earnings).

Bristol-Myers has become Bristol Myers Squibb (BMY) and has compounded at 12.4% annually. (1971 P/E ratio was 24.9x earnings).

Gillette is now Procter & Gamble (PG) and has compounded at 12.7% annually. (1971 P/E ratio was 24.3x earnings).

Dow Chemical Co. (DOW) has compounded at 9.6% annually. (1971 P/E ratio was 24.1x earnings).

Philip Morris has become Altria (MO), Philip Morris International (PM), Kraft-Heinz (KHC), and Mondelez (MDLZ). It has compounded at 19.2% annually. (1971 P/E ratio was 24.0x earnings).

General Electric (GE) has compounded at 11.0% annually. (1971 P/E ratio was 23.4x earnings).

First National City Corp. is now Citicorp (C) and has compounded at 3.8% annually. (1971 P/E ratio was 20.5x earnings).

International Telephone & Telegraph Corp. is now ITT, Xylem, and Harris stock (the Harris stock was mostly a cash transaction from the Exelis acquistion that also included Harris stock). (1971 P/E ratio was 15.4x earnings).

Originally posted 2016-04-11 23:20:27.

Like this general content? Join The Conservative Income Investor on Patreon for discussion of specific stocks!