« "A Corporate Jargon of Uplift That Turns Sensitive Souls Suicidal" | Main | In 1596 Luis de Carvajal Was Burned at the Stake for "Observing Jewish Practices" »


"You Never Know for Sure Where Good Ideas Will Come From"



(p. B1) The best-performing U.S. stock over the past 30 years isn't a household name like Costco Wholesale Corp. or Johnson & Johnson. It's Balchem, up 107,099% since the end of 1985, according to FactSet Research Systems.

You'd never heard of Balchem? Me either; stocks don't come much more obscure than this. Based in Wawayanda, N.Y. (population 7,266), about 70 miles northwest of New York City, Balchem makes flavorings, fumigating gases and nutritional additives for animal feed. Its total stock market value is about $1.7 billion.

Since the end of 1985, Balchem has gained an average of 26.2% annually, compared with 10.3% for the S&P 500 and 15.7% for Warren Buffett's Berkshire Hathaway Inc.


. . .


(p. B7) But you can learn from Balchem and its peers for free. Over the past 30 years, 44 U.S. stocks generated cumulative total returns of 10,000% or more, according to FactSet. The 10 behind Balchem are Home Depot Inc., Amgen Inc., Nike Inc., UnitedHealth Group Inc., Danaher Corp., Altair Corp., Kansas City Southern, Jack Henry & Associates Inc., Apple Inc. and Altria Group Inc. All grew by at least twice the rate of the S&P 500. Investment manager William Bernstein of Efficient Frontier Advisors in Eastford, Conn., has christened such companies "superstocks."

Perhaps the most notable thing they share, says David Salem, chief investment officer at Windhorse Capital Management in Boston, is that "they have all undergone at least one near-death experience."


. . .


Balchem shows the patience, grit and good luck it takes for a company to turn into a superstock.

The firm began in 1967 as a specialty-chemicals company that made ingredients for hairspray and ink, among other things, says Raymond Reber, who stepped down as chief executive in 1997.

In 1996, Balchem was losing so much on a new technology to coat nutrients that "it was crazy," says Mr. Reber. "We couldn't operate that way." So, he recalls, he told the company's factory workers, "'You have to figure out a way to double our production without raising our costs.' And they did it."

But the transition was rough. Balchem's shares dropped 57% in 13 months between late 1997 and the end of 1998.

Dino Rossi, who was Balchem's chief executive between 1998 and last year, remembers a staff engineer pointing out long ago that its nutritional choline salts might have a nonfood purpose: to help stabilize clay deposits. Years went by before fracking for oil and gas created a bonanza for that use. The end result: tens of millions of dollars in revenue for Balchem.

"You never know for sure where good ideas will come from," says Mr. Rossi, "and it doesn't happen overnight."

It took years for Balchem to perfect microcapsules that could survive the harsh acids of a cow's first stomach and then release nutrients farther along in the animal's digestive system. "You have to be constantly working the technology harder," says Mr. Rossi.



For the full commentary, see:

JASON ZWEIG. "No. 1 Over 30 Years? You Will Never Guess." The Wall Street Journal (Sat., Jan 30, 2016): B1 & B7.

(Note: ellipses added.)

(Note: the online version of the article has the date Jan 29, 2016, and has the title The Best Stock Over the Last 30 Years? You've Never Heard of It.")






Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

HP3D5006CropSmall.jpg






Archives















The StatCounter number above reports the number of "page loads" since the counter was installed late on 2/26/08. Page loads are defined on the site as "The number of times your page has been visited."


View My Stats