"There is an undeniable mystique to this globe-girdling financial firm, found perennially atop investment-bank league tables. Mystique goes only so far, however. The secret to Goldman's success is a more prosaic combination of hard work, business acumen and teamwork, all integral to a corporate culture that knows big rewards don't come without taking calculated risks...With its three divisions -- investment banking, trading and principal investments, and asset management -- "Goldman Sachs is in the sweet spot in the growth of global capitalism," says Rick Wetmore, a portfolio manager at Turner Investment Partners, which owns Goldman stock. "And it is at the heart of the proliferation of private equity moving into public markets."

"Our runner-up by a nose has nothing to hide. Like Goldman, this giant asset manager is reaping the rewards of global growth and capitalizing on industry changes. Merrill Lynch analyst Cynthia Mayer notes that the strength of equity and bond markets in the past four years has attracted funds to money managers like Franklin, raising assets under management and fund-manager fees. Moreover, the money-management business is characterized by relatively high operating margins of around 30%, she says. In general, Franklin has a well-recognized franchise among financial planners and gets "a lot of shelf space" from distributors, Reid says. Franklin's shares have risen about 40%, to 135, in the past 12 months and trade for about 20 times 2007 consensus earnings estimates of $6.91 a share for the fiscal year ending September. Last year, the company earned $5.44, up 31%. Reid has "trimmed a bit" of his holding but remains an investor for the longer term."

"The near-ubiquitous iPod MP3 portable music player has redefined Apple -- and the way we listen to music. Sales could reach 50 million units this year, up from just one million in 2003, and drive further gains in cash flow and earnings for Cupertino, Calif.-based Apple...For all the attention on the iPod franchise, the company's incremental growth rests with other products, such as the soon-to-be released iPhone and the Macintosh personal computer, which continued an impressive comeback in the second fiscal quarter, ended March. MAC sales of 1.5 million were up 36% from the same quarter in fiscal 2006...The iPhone will be a big determinant of Apple's future, he says. The device, which is expected to go on sale late next month, combines an iPod, a cellphone and an Internet device. If Apple sells 12 million iPhones in the higher price range, the company could generate $6 billion in incremental revenue, says Gabe Birdsall, a manager of the AIM Constellation Fund (CSTGX); Apple is the fund's biggest position. Birdsall thinks the company could double its size in three to five years, but he cautions that an iPhone flop would weigh heavily on its shares."

"Our fourth-place finisher isn't a household name, but it is well known among the world's mining and construction companies. Westport, Conn.-based Terex, which makes large, off-road heavy-duty mining trucks and mobile cranes, among other big machines, has benefited handsomely from the global commodity boom, says Zili Zhang, directive of quantitative research for American Century Investments. Terex's cash-flow growth stems, in no small part, from its numerous acquisitions in the late 1990s and early 2000s; it combined companies and cut overhead, says Ron Muhlenkamp, who runs the Muhlenkamp Fund (MUHLX) and owns Terex shares. Adding capacity this way eliminated the need to build new plants when the global boom got under way a few years ago."

"Paccar makes light, medium and heavy-duty trucks and engines and sells them around the world. Like Terex, Paccar's cash flow has been boosted by global growth. In addition to strong sales growth -- revenue jumped 17% to $16.5 billion last year -- Paccar built up its cash flow by increasing inventory turns 400% and cutting expenses as a percentage of sales by 60% in the past decade, notes its chairman and CEO, Mark Pigott. More recently, it has accelerated the design process for new products so that new rigs come to market in two to three years instead of five years, he says...Paccar can operate with relatively little working capital, freeing up cash for other things, he says. That has contributed to above-average returns and operating margins, he adds...Paccar managed to beat estimates handily in the first quarter, raising dividends in the process to 25 cents a share per quarter. The U.S. represents a not-insignificant 40% of Paccar's business, but the company has a long track record of outperforming and is likely to keep doing so, as long as the global economy stays strong."

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