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36
STRATEGY

The Second 100 Are Tops In The Market
 

INC.'s Second 100 left other investments in the dust by returning 115% in the past year.
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For the past three months, INC. has been analyzing the performance of "INC. 100" companies in the stock market. By any measure, their gains were exceptional, sometimes dramatic. This month INC. editors have pitted the INC. Second 100 -- the country's 101 to 200 fastest-growing publicly held corporations (see INC., June, page 37) -- against four popular market averages for a recent 12-month period. The results, as the accompanying graph shows, were equally distinguished.

Indeed, considering that a person who owned $100 worth of each of these stocks would have more than doubled the $10,000 investment without having to bother with buy-sell decisions, and that 14 of the companies weren't even trading for the whole year, the increment is no less than sensational. And, on the face of it, surprising as well: Since the members of this group were runners-up in the sales-growth race, they might also have been expected to trail in the stock-market arena.

Instead, the Second 100 resoundingly shattered the 100% stock market profit level for the 12 months ending June 1, 1981. In so doing, it more than quintupled the Dow and the Standard & Poor's 400, more than tripled the Amex, and nearly doubled the hot industrials of NASDAQ. Further, it utterly squashed gold bugs (gold fell more than 10%), obscured money-market returns, and buried collectibles from postage stamps to California condos. This blowout should put to rest the still-prevalent assumption that common stocks haven't provided an adequate inflation hedge. It simply depends on which stocks are being referred to.

Statistically speaking, there were only a few high-end anomalies, chief among them Data Architects' 1,900% surge from 75c to $14.25. All in all, the individual performances were solidly middle-of-the-road. Even the price/earnings ratios, which of course rose on balance (to an average multiple of 26), did not reach the extremes seen in earlier INC. market studies.

Nonetheless, the fact that these slower-growing companies (their five-year revenue change was +364% on average, compared to the first 100's +1,188%) outpaced their faster brethren in a comparable market period by a sizzling 39 percentage points (see INC., May, page 161), bears reflection. Why did slower growth, both in sales and in earnings, inspire more investor confidence?

Among the reasons is that the second rank comprises companies with longer histories than the first 100. As INC.'s "Second 100" report concluded, the companies tended to be older. Their growth rates may be winding down (24 of the Second 100 are graduates of an earlier First 100), but their proven stability in earnings and profitability makes them less volatile and hence less chancy in the market. Only 12 of the present gathering showed stock market losses, and only a handful reported deficits in the latest available statements.

But they're no top-heavy IBMs, either. The Second 100 is a seasoned bunch whose growth stands every chance of spurting anew and shows little sign of shrinking suddenly to insignificance or being overwhelmed by stock dilution.

An investment in one of these companies stands less of a risk of diminishing precipitously. That, plus a still-more-than-adequate earnings growth rate -- the Second 100 sported a collective 48% increase in profits from 1979 to 1980 -- would seem primarily to be what spurred this maturing group to new INC. heights.

1981 INC. SECOND 100: RELATIVE MARKET PERFORMANCE

Name6/2/80 6/1/81 % Gain
INC. 100 215 115
Dow Jones Industrials 847.35 997.96 18
Standard & Poor's 400124.53 149.31 20
American Exchange Index 272.51 370.44 36
NASDAQ Industrials 177.04 281.57 59

THE 1981 INC. SECOND 100: TRACKING THE 12-MONTH STOCK PERFORMANCE

Note: This table may be divided, and additional information on a particular entry may appear on more than one screen.

Stock splits/dividends, Bid/close

Rank Company status change 6/2/80 6/1/81

101 Worldwide Energy 4:3 split, 1/26/81 12 3/16 10 7/8

n(2)

102 First Artists 3 1/8 4 7/8

Productions

103 Control Laser 3:2 split, 12/15/80 11.17 20

104 Microdyne 50% stk div, 12/22/80 15.17 33 3/4

105 Autodynamics Common reclassified into n(3) 4 5/8 21

A and B, 5/30/81; basis:

one of each per share

106 Cullinane 2:1 split, 11/10/80 16 1/2 68 3/4

Database

Systems

107 North American n(3) 11 n(3) 30

Watch

108 Heritage 50% stk div, 1/23/81 8.08 17

Communications

109 Staff Builders 15 11 5/8

110 Oxoco 8 1/2 15 7/8

111 Comshare 13 1/2 14 1/4

112 Mediscience n(3) 3/4 1/8

113 Ramtek 12 1/2 15 3/8

114 Emons Industries 3% stk div, 2/10/81 8 1/4 5 1/2

115 General Devices 4 5/8 5 1/2

116 Anacomp 12 1/2 23

117 AM Cable TV 3:2 split, 5/15/81 6.67 19 3/4

Industries n(4)

118 CPT 18 61 3/4

119 Federal Resources 6 5/8 4 7/8

n(2)

120 Evans & 30 114

Sutherland

Computer

121 Service 50% stk div, 2/20/81 10 19 1/4

Fracturing n(5)

122 Analysts 4 1/4 7 1/2

International

123 Gerber 100% stk div, 11/4/80 12 1/2 25 1/2

Scientific n(1)

124 Phoenix Materials 3 1/2 3 3/4

125 MGF Oil 100% stk div, 1/19/81 9 1/4 13

126 HCC Industries n(3) 8 1/4 10 7/8

127 Norstan 10% stk div, 6/30/80; 6.67 15 1/2

50% stk div, 11/21/80

128 Robinson-Nugent 15 3/4 19

129 Housing Systems n(3) 3/8 1/2

130 HEI n(6) 9 1/4 8 3/4

131 Computer Task 10% stk div, 7/7/80 6.6 20 1/2

Group

132 Bolar 100% stk div, 11/10/80 9 16

Pharmaceutical

133 Power Conversion n(3) 1 3/4 4 1/4

134 Thompson 17 1/4 18 5/8

Medical n(1)

135 Applicon n(7) 22 33 1/4

136 Tylan n(7) 18 21 1/4

137 Dranetz 50% stk div, 10/10/80 10.83 20

Engineering

Laboratories

138 Sandgate n(2) 5 3/4 7 5/8

139 Kenai n(1) 3:2 split, 9/29/80 15.33 21 3/8

140 SEI n(6) 17 27 3/4

141 Harken Oil & Gas 10 3/8 13 1/8

142 Key Energy 10% stk div, 6/16/80 5.11 6 1/2

Enterprises

143 Sigmaform 10 18 1/2

144 Comserv 50% stk div, 6/1/81 4.67 13 7/8

145 AES Technology 3 1/4 3 7/8

Systems

146 American 21 1/2 17 3/4

Management

Systems

147 Discovery Oil 2 5/8 2 3/4

148 Lear Petroleum n(1) 16 7/8 26 3/4

149 Impell 50% stk div, 3/13/81 16.33 59 1/2

150 Transducer Systems 5:4 split, 12/15/80 3.80 9 1/2

151 United States 2:1 split, 12/8/80 15 5/8 35 1/2

Surgical

152 TIE/Communications 50% stk div, 6/16/80; 4.67 33 3/8

n(2)

3:2 split, 11/10/80

153 Chessco Industries n(3) 3 1/2 5 3/4

154 Duralith n(6) 15 1/2 17 3/4

155 Standard 8 7/8 10 3/4

Microsystems

156 Siltec 18 20 1/2

157 CACI 13 19 1/4

158 National 5 1/4 18 1/2

Micronetics

159 Dataram 9 1/2 9 5/8

160 Air Wisconsin 3:2 split, 5/1/81 6.67 17 1/2

161 Dicomed 3:2 split, 5/15/81 5.67 16 1/2

162 Zentec n(8) 16 27

163 Vermont Research 16 3/4 23 3/4

164 Brookwood Health 16 1/4 51 1/4

Services

165 Beard Oil 16 1/2 23

166 Data Architects 3/4 14 1/4

167 Communications 50% stk div, 5/18/81 2.08 9 1/2

Corp. of

America

168 E.I.L. Instruments 12 9

n(9)

169 Materials 4:3 split, 3/13/81 18.28 26

Research n(2)

170 American 100% stk div, 8/15/80 4 7/8 17

Agronomics n(1)

171 PaR Systems 12 1/4 33 1/2

172 Salem National 5 2

173 Nicolet Instrument 15 1/2 22 1/2

174 Penril n(2) 9 1/2 15 7/8

175 Omnimedical 3:2 split, 12/31/80 2 1/2 22

176 National 10% stk div, 4/2/81 10 17 5/8

Education n(1)

177 Pengo 14 1/8 26

Industries n(1)

178 Verna n(2) n(10) 15 17 1/2

179 Maxon Industries 6 3 1/2

180 NSA n(3).10 n(3).30

181 Cascade Steel 7 1/2 14 1/2

Rolling

Mills

182 Analogic 100% stk div, 9/26/80 10 3/4 35 1/4

183 Systematics 4 1/2 7 1/4

General

184 Applied Materials 3:2 split, 2/5/81 13.67 32 1/4

185 Data Card 50% stk div, 8/20/80 14 3/4 14 7/8

186 Berry Industries 3 12 3/8

187 Verbatim 15 3/4 26 1/2

188 Cherry Electrical 11 3/4 16 3/4

Produc

ts

189 Sensormatic 100% stk div, 9/26/80 15 1/16 42 3/4

Electronics

190 Raycomm Industries 1 3/4 4

191 Argonaut Energy 6 1/2 6 3/8

192 Monolithic 21 22 3/4

Memories n(5)

193 Prairie Producing 15 11 3/4

n(9)

194 May Petroleum 3:2 split, 10/21/80 17 1/2 32 1/4

195 Computer Entry 7 7 1/4

Systems n(9)

196 Haemonetics 18 1/4 27 1/2

197 K-tron 16 19

International n(8)

198 Survival 7 9 3/4

Technology

199 Electrospace 20% stk div, 9/25/80 8.33 25 1/2

Systems

200 Kevex 100% stk div, 11/20/80 12 3/8 27 1/4

12-month

Stock splits/dividends, P/E ratio value of

$100

Rank Company status change 6/2/80 6/1/81 invested

101 Worldwide 4:3 split, 1/26/81 25 43 $89

Energy n(2)

102 First Artists 10 9 156

Productions

103 Control Laser 3:2 split, 12/15/80 24 46 179

104 Microdyne 50% stk div, 12/22/80 17 38 223

105 Autodynamics Common reclassified into 10 27 454

A and B, 5/30/81; basis:

one of each per share

106 Cullinane 2:1 split, 11/10/80 22 54 417

Database

Systems

107 North American NA NA 273

Watch

108 Heritage 50% stk div, 1/23/81 6 49 210

Communications

109 Staff Builders 22 18 78

110 Oxoco NA 85 187

111 Comshare 11 17 106

112 Mediscience NA NA 17

113 Ramtek 24 35 123

114 Emons Industries 3% stk div, 2/10/81 8 def 67

115 General 26 24 119

Devices

116 Anacomp 14 22 184

117 AM Cable TV 3:2 split, 5/15/81 NA 37 296

Industries n(4)

118 CPT 14 29 343

119 Federal 21 45 74

Resources n(2)

120 Evans & 25 48 380

Sutherland

Computer

121 Service 50% stk div, 2/20/81 NA 19 193

Fracturing n(5)

122 Analysts 9 16 176

International

123 Gerber 100% stk div, 11/4/80 17 24 204

Scientific n(1)

124 Phoenix NA NA 107

Materials

125 MGF Oil 100% stk div, 1/19/81 35 24 141

126 HCC Industries NA 12 132

127 Norstan 10% stk div, 6/30/80; 12 22 233

50% stk div, 11/21/80

128 Robinson-Nugent 12 21 121

129 Housing Systems NA NA 133

130 HEI n(6) NA NA 95

131 Computer Task 10% stk div, 7/7/80 NA 16 311

Group

132 Bolar 100% stk div, 11/10/80 18 29 178

Pharmaceutical

133 Power Conversion NA NA 243

134 Thompson 11 7 108

Medical n(1)

135 Applicon n(7) NA 37 151

136 Tylan n(7) NA 14 118

137 Dranetz 50% stk div, 10/10/80 12 20 185

Engineering

Laboratories

138 Sandgate n(2) 8 6 133

139 Kenai n(1) 3:2 split, 9/29/80 20 11 139

140 SEI n(6) NA 31 163

141 Harken Oil & Gas def def 127

142 Key Energy 10% stk div, 6/16/80 NA NA 127

Enterprises

143 Sigmaform 15 19 185

144 Comserv 50% stk div, 6/1/81 12 28 296

145 AES Technology def NA 119

Systems

146 American 17 16 83

Management

Systems

147 Discovery Oil def def 105

148 Lear Petroleum 15 26 159

n(1)

149 Impell 50% stk div, 3/13/81 13 28 364

150 Transducer 5:4 split, 12/15/80 NA NA 250

Systems

151 United States 2:1 split, 12/8/80 22 37 227

Surgical

152 TIE/ 50% stk div, 6/16/80; 13 47 715

Communications

n(2)

3:2 split, 11/10/80

153 Chessco NA NA 164

Industries

154 Duralith n(6) NA 17 115

155 Standard 18 21 121

Microsystems

156 Siltec 16 19 114

157 CACI 8 14 148

158 National 21 def 352

Micronetics

159 Dataram 7 11 101

160 Air Wisconsin 3:2 split, 5/1/81 10 15 263

161 Dicomed 3:2 split, 5/15/81 13 40 292

162 Zentec n(8) NA 40 169

163 Vermont 14 14 142

Research

164 Brookwood 10 78 315

Health

Services

165 Beard Oil 20 22 139

166 Data Architects NA NA 1,900

167 Communications 50% stk div, 5/18/81 NA 29 457

Corp. of

America

168 E.I.L. NA 13 75

Instruments n(9)

169 Materials 4:3 split, 3/13/81 16 21 142

Research n(2)

170 American 100% stk div, 8/15/80 12 25 349

Agronomics n(1)

171 PaR Systems 8 25 273

172 Salem National def def 40

173 Nicolet 16 22 145

Instrument

174 Penril n(2) 8 12 167

175 Omnimedical 3:2 split, 12/31/80 42 29 880

176 National 10% stk div, 4/2/81 6 9 176

Education n(1)

177 Pengo Industries 33 25 184

n(1)

178 Verna n(2) n(10) NA 14 117

179 Maxon Industries 27 def 58

180 NSA NA NA 300

181 Cascade Steel 3 12 193

Rolling

Mills

182 Analogic 100% stk div, 9/26/80 14 36 328

183 Systematics def 56 161

General

184 Applied 3:2 split, 2/5/81 11 20 236

Materials

185 Data Card 50% stk div, 8/20/80 12 13 101

186 Berry Industries 50 14 413

187 Verbatim 18 def 168

188 Cherry 7 13 143

Electrical

Products

189 Sensormatic 100% stk div, 9/26/80 17 34 284

Electronics

190 Raycomm def def 229

Industries

191 Argonaut Energy 32 81 98

192 Monolithic NA 12 108

Memories n(5)

193 Prairie NA 20 78

Producing n(9)

194 May Petroleum 3:2 split, 10/21/80 27 35 184

195 Computer Entry NA 20 104

Systems n(9)

196 Haemonetics 21 27 151

197 K-tron NA 33 119

International n(8)

198 Survival 12 NA 139

Technology

199 Electrospace 20% stk div, 9/25/80 12 24 306

Systems

200 Kevex 100% stk div, 11/20/80 21 42 220

n(1) NYSE

n(2) American Stock Exchange

n(3) best available quote

n(4) initial public offering 10/80

n(5) initial public offering 8/80

n(6) initial public offering 3/81

n(7) initial public offering 7/80

n(8) initial public offering 12/80

n(9) initial public offering 4/81

n(10) initial public offering 2/81

Quotes adjusted for capital changes in period. All stocks traded O-T-C unless otherwise noted. NA Not applicable or not available

Last updated: Aug 1, 1981




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