03/30/19 THE NIMBLE NEW LEADERS OF THE PACK

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THE NIMBLE NEW LEADERS OF THE PACK

Unless you're one of the millions of Americans who recently bought or refinanced a house, you've probably never heard of Countrywide Credit Industries Inc. Although the largest independent mortgage broker in the U.S., Countrywide has only 5% of the market.
But in 1997, 5% was plenty. With interest rates near record lows, unemployment minimal, and home affordability at all-time highs, the environment for a mortgage broker was ideal. ''In my 45 years in the business,'' says CEO Angelo R. Mozilo, ''I have never seen an environment like this.'' Yet Countrywide is no one-year wonder. Thanks to sales growth that has averaged 24.6% annually over the past three years--and sizzling 42.8% earnings gains--it zoomed into the No.27 spot on the BUSINESS WEEK 50 after being added to the Standard & Poor's 500-stock index last year.
Countrywide is one of several names on this year's BW 50 that may be unfamiliar. Ever heard of Progressive Corp.? PACCAR Inc.? How about HBO & Co.? No, it's not the cable-TV channel--the Atlanta-based company provides information systems to the health-care industry. The S&P 500 may list the most closely watched companies in America, but by focusing on three separate growth measures, our Performance Rankings scooped up these and other little-known gems.
They all have found some way to push to the front of the pack. Some, like HBO, have tailored products to their customers better than their rivals. Others, like Progressive, excel at service. And when markets shift, many of the newcomers don't wait to get squashed. Since 1994, when a crushing price war broke out in mortgages, Countrywide has moved to minimize the impact of rate changes on its revenue stream. Now, the Pasadena (Calif.) company balances mortgage originations with servicing fees. Steady even in times of rising rates and heavy price competition, fees now make up half of its revenues.
Often these unsung performers have had little choice but to innovate. That was the case in the early 1990s for auto insurer Progressive of Mayfield Village, Ohio. Then specializing in high-margin policies for motorcycle riders and other risky drivers, it was forced by growing competition from mainline property and casualty insurers to move into traditional auto insurance for a broad base of drivers. Peter B. Lewis, who has been CEO for 33 years, figured he could set Progressive apart by offering the highest service levels possible, such as 24-hour, seven-day-a-week service by phone. It worked: His total return to shareholders over three years is 202%.
Some of the strategies that landed more glamorous companies atop the BW 50 also worked for those laboring in obscurity. PACCAR, a Bellevue (Wash.) maker of long-haul trucks, vaulted 328 places, to No.29. It snatched the lead in the auto industry from its better-known rivals by perfecting a lean manufacturing strategy similar to one that has made Dell Computer Corp. the star of the PC industry. PACCAR builds each rig to customer specifications, keeping inventories low and margins high. Acquisitions have also been key to its rapid rise. Thanks to its $550 million purchase of a European trucking outfit in late 1996, PACCAR's sales grew 47% in 1997. Investors saw three-year returns of 242%.
Trucks, hospital equipment, insurance--it's hardly glamorous. But as our unknown dynamos have proven, these businesses can be highly profitable. And when it comes to breaking onto the BW 50, it's more important to move fast than to move in fast circles.
By Nanette Byrnes in New York, with Kathleen Morris in Los Angeles, Stephanie Anderson Forest in Dallas, and bureau reports

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