Our 40 favorites turned in a banner year, trouncing even the S&P's glitzy performance. From June 2, 2006 to June 1, 2007, our diversified group returned 27.4%, compared with 21.5% for the . Since its inception in 2002, the Fortune 40 has delivered an 18.3% annualized return, easily besting the S&P's 14.7%.
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We started with virtually the entire market and narrowed the field by running a grueling series of screens based on each experts' methods. We focused on companies whose shares appear cheapest relative to their long-term growth prospects. We combed through SEC filings, scoured analyst reports, and grilled large shareholders. We favored stocks that are also owned by fund managers with demonstrated records of success.