IN A YEAR WHEN ECONOMIC AND FINANCIAL CRISES DOMINATED the headlines, it's easy to forget that many companies -- including some on Wall Street -- delivered the goods for investors. Those smart or lucky enough to own shares in these winners often were amply rewarded, with returns of 20%, 30% or even 100%.
A good place to find such overachievers is at the top of the Barron's 500, a unique ranking of the 500 largest (by sales) publicly traded companies in the U.S. and Canada, which aims to identify those corporations most successful at boosting their sales and cash flow. Few would dispute that this year's winner, New York money manager BlackRock, deserves to be so honored; its revenue, earnings and share price all have shown impressive gains under Chairman and CEO Laurence Fink.
No. 2 on this year's list is Research in Motion, the Canadian wireless-communications company whose CrackBerry -- oops, BlackBerry -- handheld device has become an addiction among corporate types and, increasingly, regular Janes and Joes. In the past five years RIM's shares have rallied from the single digits to a recent 133, testament to the company's vision and success in defining and growing its market.
Matthew Furman
Laurence Fink, chairman and CEO of asset manager BlackRock, this year's top-ranked Barron's 500 company.
The Barron's 500 is prepared annually by Credit Suisse Holt, a unit of Credit Suisse Group. It compares companies on the basis of one-year sales growth and stock-price performance, three-year cash-flow return on investment, or CFROI, and one-year change in CFROI for the most recent fiscal year. It grades them A through F, using the percentage change in one-year cash flow to break ties and determine rankings. (A more detailed description of Holt's methodology is at the end of this article.) The Barron's 500 rankings don't reflect the views of Credit Suisse analysts.
With oil prices soaring above $120, it's no surprise to find a pair of petroleum plays -- National Oilwell Varco and Schlumberger -- among the top five. Two more -- Smith International and McDermott International -- are in the top 10. Likewise, the bull market in commodities has elevated companies such as Freeport McMoRan Copper & Gold (No. 6) on the list.
This year's No. 5, discount broker Charles Schwab, managed to prosper despite the turmoil in financial markets, or perhaps because of the resultant surge in trading. Like BlackRock, Schwab has no capital-markets operations, and therefore suffered none of the billion-dollar write-offs of bigger brokerages that made huge credit-related bets.
The shares of many highly ranked Barron's 500 companies have outperformed the market, and now sport valuations reflecting their success. For some, future gains could be harder to come by, at least in the near term. Goldman Sachs, No. 1 last year and No. 2 in 2006, has seen its stock fall 17% to 187.72 in the past 12 months, though it ranks a respectable No. 19 this year. Apple, No. 3 in 2007, is still on a tear, however. Its shares are up 76% to 185.06, and this year it's No. 11.
Just as the Barron's 500 identifies well-managed companies, it also pinpoints those that fail to generate sufficient returns on investment. Near the bottom of our latest ranking are home builders such as KB Home and Pulte Homes; chronic underachiever Eastman Kodak, and Fannie Mae, which lost $2.19 billion in the first quarter, just a drop in an ocean of red ink.
Table: Barron's 500
The Barron's 500 serves as a reminder of how difficult it was in 2007 to generate strong operating results and impressive investment returns. So here's a nod to those companies that achieved both, and a look at how they did it.
BlackRock
Asset manager BlackRock has bulked up in recent years via mergers, gaining expertise in equities and international and alternative assets to complement its core fixed-income business.