As chief executive officer of Union Pacific (UNP), the country's biggest freight train network, Jim Young hauls everything from Gulf Coast chemicals to California chardonnay along his company's 32,000 miles of railway. Young's weekly traffic reports closely mirror the U.S. economy. In the spring of 2009, Union Pacific moved as few as 133,000 loaded freight cars a week, down from a peak of 204,000 in 2007. Now the weekly cargo tally regularly tops 165,000.
Young, a 32-year railroad veteran, is realistic about the outlook for 2010 and beyond. "The slope of the line will be positive," he says. "But it's not a steep slope. It's going to stay tough until employers start hiring again."
Cautious optimism: You may feel it, too, as you read the corporate profiles in the coming pages. In this issue, we present the Bloomberg Businessweek 50, our ranking of the 50 top-performing stocks in the Standard & Poor's 500-stock index over the past five years. In a period of tremendous economic turbulence, these stocks returned an aggregate 222.3 percent to shareholders, including reinvested dividends. Those who invested $10,000 in this portfolio five years ago and kept it there would have $32,250 in their pockets today. The S&P 500 index, over the same period from Mar. 31, 2005, to Mar. 31, 2010, returned 10 percent.
The Bloomberg Businessweek 50 is a reminder of the American economy's ceaseless ability to renew itself. Strongly represented are old-line companies, including Union Pacific (No. 44), Peabody Energy (BTU) (No. 49), and Cliffs Natural Resources (CLF) (No. 9), all of which date back to the 1800s. The forces of innovation powered others up the ranks, from Apple (AAPL) (No. 4) and Google (GOOG) (No. 16) to biotechnology players such as Celgene (CELG) (No. 13) and Gilead Sciences (GILD) (No. 26), a leader in drugs to fight HIV.
The big surprise on our list is at the top. No. 1: Priceline.com (PCLN). This online discount travel agency nearly died in the dot-com bust and again in the aftermath of the terrorist attacks of September 11, 2001. Thanks to the management smarts of CEO Jeffery R. Boyd, who took over the top job in 2002, the company reinvented itself and went on to score a total return of 911.9 percent for shareholders over the past five years.
What goes up can always come down, so there's no guarantee any company on the Bloomberg Businessweek 50 will be there in five years, or even in 2011. The companies in our ranking vary dramatically by size, from midcap salesforce.com (CRM) (No. 5) to behemoths such as Hewlett-Packard (HPQ) (No. 28), the largest company on the list, with sales of $114.6 billion. On a percentage basis, it's harder for big companies to generate incremental growth, which helps explain why so many large, successful U.S. corporations didn't make our cut.
Conversely, growth stocks are more prone to volatility. That makes the long-term success of our smaller superstars even more impressive. Regardless of market value, all 50 companies made the list by honing competitive edges through good times and bad.