If you could go back to the start of the century and make a few choice investments to make a fortune by Christmas 2013, what would you have bought?
According to Hardman & Co the best return on your investment would have been tobacco followed distantly by alcohol. Since 1 January 2000 capital returns for the UK tobacco sector have rung rings around any other investment in the UK. One pound invested in tobacco in 2000 would now be worth £7.78.
Running in at number two was the beverage industry which saw an appreciation of 358 per cent over the same period. One pound invested in booze in the year 2000 would now be worth a tidy £4.58. The research highlights the surprising findings that two mature markets have performed so strongly in the first part of the 21st century. Soberly trailing in third place were chemicals with a £4.41 return.
Hardman & Co observe that professional investors are usually judged by quarterly performance but in this note they have examined investments made over the long term. Few investors in the year 2000 would have predicted that tobacco investments would be worth 51x more than investments in IT hardware by 2013.
Looking to the future Hardman & Co said:
Our main wild card is politics, both at the micro and macro level. The credit crisis has paradoxically both weakened consent while emboldening policy makers, often in a somewhat arbitrary way.
We suspect financials will do well as they are global growth in markets while there should be loose monetary policy beneficiaries over the next few years, offset by political and regulatory risk. Consumer goods with an emerging market bias should be fine, but the domestic scene will be challenging. The wild cards are oil and mining. Today they display many of the negative sentiment characteristics that dogged tobacco back in 2000.