The worst economic crisis since the Great Depression has investors everywhere wondering whether to buy, hold -- or bail. Though there's no telling whether the current global recession will turn into a sepia-toned, soup-lined sequel to that historic calamity, it did get us thinking: If the whole point of stocks is to buy low and sell high, then the Great Depression must have offered some pretty good buying opportunities.
But what were they? SmartMoney.com went in search of the Great Depression's best buys, with help from the Center for Research in Security Prices at the University of Chicago's Booth School of Business. The CRSP crunched numbers to find the 50 best performing stocks from 1932 to 1954 by cumulative total return. The result: A dream portfolio for the greatest investors of the Greatest Generation.
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We started with 1932 because, while the famous market crash occurred in 1929, it didn't hit rock bottom until almost three years later. Even uglier, the Dow Jones Industrial Average didn't regain its precrash level until 1954, meaning it took more than a couple of decades to make investors whole.
Looking over the list is a reminder of days gone by -- and a time when company names were straightforward and even mundane. No Navistars or Altiras here. Fans of "The Simpsons" might recall that Mr. Burns had put money into the fictional Amalgamated Spats, but in real life he should have doubled down on Electric Boat and National Acme Co. The former, which still makes submarines to this day as a unit of General Dynamics, returned a whopping 55,000% over those 22 years. National Acme (it made machine tools, not giant slingshots for perpetually frustrated cartoon coyotes) returned more than 10,000%.
We've taken the complete list of 50 top investments and selected 15 of the most telling. One thing many of them share -- and a factor that might resonate with investors today, given the Obama administration's stimulus plans -- is the impact of massive deficit spending. New Deal, World War II and Cold War outlays fueled many of these stocks. Here, then, is our look at some of the greatest Great Depression stocks.
1. Electric Boat: Unsinkable Submarine Maker
Cumulative Total Return 1932 to 1954: 55,000% (Rank in Top 50: 1)
Where is it now? A unit of General Dynamics
Churning out hundreds of PT boats and submarines during WWII (as well as building the U.S.S. Nautilus, the world's first nuclear sub, during the Cold War) more than kept this stock afloat.
2. International Paper & Power: Paper, Not Plastic
Cumulative Total Return 1932 to 1954: 30,503% (Rank in Top 50: 4)
Where is it now? International Paper
Long before plastic packaging (or the digital age, for that matter), paper was king when it came to correspondence and containers. Indeed, four of the 50 best stocks from 1932 to 1954 were in companies that made paper, paper bags and corrugated cardboard.
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3. Zenith Radio: Tuned In
Cumulative Total Return 1932 to 1954: 24,146% (Rank in Top 50: 7)
Where is it now? Part of LG Electronics
Once upon a time radios were so big they weren't personal consumer electronic devices; they were furniture. Back then American, not Asian, manufacturers dominated the market for civilian and military use.
4. Douglas Aircraft: Bombs Away
Cumulative Total Return 1932 to 1954: 23,586% (Rank in Top 50: 8)
Where is it now? Bloodline leads to Boeing
It's little wonder a military contractor that helped make the B-17 bomber (as well as iconic civilian planes such as the DC-3 and DC-9), would fare well during WWII and the Cold War. North American Aviation (P-51 fighter, B-25 bomber) also made the list.
5. Minneapolis Honeywell Regulator: Thermostats Were Hot
Cumulative Total Return 1932 to 1954: 21,608% (Rank in Top 50: 9)
Where is it now? Honeywell International
Central heating is taken for granted these days, but only thanks to pioneering advances like the company's original Butz Thermo-Electric Regulator "damper flapper," which helped keep offices and factories at just the right temperature.
Click here for a complete list of the 15 greatest investments from the Great Depression.
