stripped-down AT&T was bought by one of its children, SBC Communi-
cations, in 2005, and through other acquisitions, it worked itself back to
the top 20 in market value in the United States by 2007. The 50-year re-
turn on AT&T, had you also held all the Baby Bells when Ma Bell spun
them off 23 years ago, would have given you a 10.77 percent annual re-
turn, virtually matching the index.
General Motors, which was formed by the consolidation of 17 auto
companies in 1908, was destined to become the largest auto producer in
the world, a title that in 2007 it still owns. And until it was surpassed by
Toyota in 2007, General Motors was the world leader in sales. But foreign
competition and healthcare obligations to its retired labor force have
drained GM’s resources and reduced the creditworthiness of its once-
grade-A obligations to “junk” status. Despite its trouble, it is the largest
foreign car manufacturer in China, the world’s fastest-growing automo-
tive market. The world is waiting to see whether GM, like U.S. Steel and
AT&T, can regain its predominant position in the automobile market.
The returns of three—Union Carbide (now part of Dow Chemical),
DuPont, and Alcoa—of the remaining four firms all belong to the mate-
rials industry and have lagged the market significantly over the past half
century. The fourth firm, Eastman Kodak, failed to make a successful
transition to digital photography. Unionization and foreign competition
are some reasons behind the poor performance of these firms. Whether
these erstwhile giant corporations will be able to reinvent themselves is
yet to be seen.
TOP-PERFORMING FIRMS
The 20 best-performing firms of the original S&P 500 that have survived
with their corporate structure intact are shown in Table 4-2. Table 4-3
lists the 20 best-performing firms whether they have survived intact or
have been merged into another firm.
By far the best-performing stock was Philip Morris, which in 2003
changed its name to Altria Group.^4 Philip Morris introduced the world
to the Marlboro Man, one of the world’s most recognized icons, two
years before the formulation of the S&P 500 Index. Marlboro cigarettes
subsequently became the world’s best-selling brand and propelled
Philip Morris stock upward.
The average annual return on Philip Morris over the past half cen-
tury, at 19.88 percent per year, almost doubled the 10.88 percent annual
58 PART 1 The Verdict of History
(^4) The firm retained its ticker symbol MO, or “Big Mo,” as traders affectionately call Philip Morris.