A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

THE NIFTY FIFTY
In the 1970s, Wall Street’s pros vowed to return to “sound
principles.” Concepts were out and blue-chip companies
were in. They would never come crashing down like the
speculative favorites of the 1960s. Nothing could be more
prudent than to buy their shares and then relax on the golf
course.
There were only four dozen or so of these premier growth
stocks. Their names were familiar—IBM, Xerox, Avon
Products, Kodak, McDonald’s, Polaroid, and Disney—and
they were called the Nifty Fifty. They were “big

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capitalization” stocks, which meant that an institution could
buy a good-sized position without disturbing the market.
And because most pros realized that picking the exact correct
time to buy is difficult if not impossible, these stocks seemed
to make a great deal of sense. So what if you paid a price that
was temporarily too high? These stocks were proven
growers, and sooner or later the price would be justified. In
addition, these were stocks that—like the family heirlooms—
you would never sell. Hence they also were called “one
decision” stocks. You made a decision to buy them, once, and
your portfolio-management problems were over.
These stocks provided security blankets for institutional
investors in another way, too. They were respectable. Your
colleagues could never question your prudence in investing in
IBM. True, you could lose money if IBM went down, but
that was not considered a sign of imprudence (as it would be
to lose money in a Performance Systems or a National
Student Marketing). Like greyhounds in chase of the
mechanical rabbit, big pension funds, insurance companies,
and bank trust funds loaded up on the Nifty Fifty one-
decision growth stocks. Hard as it is to believe, institutions
started to speculate in blue chips. The table below tells the

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story. Institutional managers blithely ignored the fact that no
sizable company could ever grow fast enough to justify an
earnings multiple of 80 or 90. They once again proved the
maxim that stupidity well packaged can sound like wisdom.