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Tickers in this Article: QSII, GMCR, RGLD, INT, CERN, POOL
Up until 2007, swimming pool distributor Pool Corp. (Nasdaq:POOL) was doing just fine. As the economy started to slow, down went its business and with it, its stock, dropping 48.5% in 2007 and 6.9% in 2008. Year-to-date it's trading flat with no direction in sight. Prior to the two-year retreat, Pool Corp.'s stock was one of the most reliable trades on any exchange. Between 1999 and 2006, it gained 30% or more on an annualized basis five out of eight times. Investors who owned the stock during its heyday have done well for themselves, even if they are still holding today. And more good times for stocks like these are just around the corner. After all, slow and steady usually wins the race.

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Narrow The Field
There isn't a stock screen available at most finance sites that enables you to easily seek out the slow and steady. Therefore, let's start the search by producing a list of stocks that went up in the past 52-weeks. Then, we'll eliminate stocks with market caps less than $1 billion and nix those unable to grow sales 10% or more annually over the last five years. The three-point screen produced 109 stocks. Only those with more up years than down will make the cut. Hopefully, this will reveal a few steady growers that can continue to grow for many years to come. (For more on stock screening, see How Investors Can Screen For Stock Ideas.)

Top Five Stocks 1999-2009 Using Above Criteria

Company
Up Years / Down Years
Annualized Returns – 10 Years
Quality Systems (Nasdaq:QSII)
8 & 3
48.4%
Green Mountain Coffee Roasters (Nasdaq:GMCR)
9 & 2
44.9%
Royal Gold (Nasdaq:RGLD)
6 & 5
30.8%
World Fuel Services (NYSE:INT)
8 & 3
22.4%
Cerner (Nasdaq:CERN)
8 & 3
11.0%



A Difficult Search

To make the cut, a company needed to be doing well going into 2007. If your business was struggling prior to the market meltdown, there's a good chance you didn't have too many up years during the bear market. Out of 109 candidates, the five above meet all three criteria and have stocks that have traded on an exchange for at least ten years. Several potential candidates showed excellent revenue growth and stock appreciation but only over the short-term (four to five years), hence their disqualification.

A Strong Team
History generally repeats itself but usually with some deviations in between. Otherwise, this portfolio is a lock. For starters, let's look at Green Mountain Coffee Roasters. Back on November 18, 2008, I predicted rich possibilities ahead for the Vermont-based coffee company. Its stock is up 182% in just six months. I'd say that's rich. Its momentum will probably end soon; however, if it continues to operate its business as well as it has in the past, the future will remain profitable.

Two of the remaining four stocks are health information companies. As healthcare has gotten more expensive, it's no wonder Quality Systems and Cerner have both benefited from a need for better information. While Cerner is the much larger company with revenues of $1.68 billion versus $230.92 million for Quality Systems, it's the smaller company that is getting all the attention. In October, it ranked fourth on Forbes' annual list of 200 Best Small Companies. Now its stock is priced for perfection (with an enterprise value 18 times EBITDA) and although its margins are high, this one is probably ready for a cooling period. On that basis, Cerner seems to be a better bet.

World Fuel Services was recently pushed on CNBC by Brian Kelly of Kanundrum Research, who owns the stock and feels a recovering economy means much better revenues for the cargo-ship fuel provider. It's now just a matter of when. As for Royal Gold, if you're interested in a commodity play and owning stock in the actual producer isn't important, this royalty investor is the way to go. It owns a piece of a mine's future revenue generation while avoiding the costs of building and operating a mine.

The Bottom Line
Companies whose stocks perform over the long-term are very valuable. For the patient investor, they provide stability to any portfolio. On an individual basis, all five of these companies are steadier than most. As a portfolio, I doubt you could do much better. (For more, see Steady Growth Stocks Win The Race.)

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