Gartner Top 25: If the supply chain were a stock, would you buy it?

If the supply chain were a stock, would you buy it?

That was a question I asked myself last summer as I was preparing our annual look at Gartner’s 2017 Top 25 supply chains for the September issue of SCMR, I wondered which would’ve performed better over the last year: A $27,000 investment in an S&P 500 index fund or a $27,000 investment in the 25 publicly-traded companies in Gartner’s 2016 Top 25 plus the two supply chain master’s in that year’s ranking. I’m going to call it the Gartner Index.

To answer the question, I invested $1,000 of pretend money using a September 1, 2016 purchase price in each of the 27 companies from the 2016 Top 25, or $27,000 total. I then invested $27,000 in the S&P 500 index on the same date – again, pretend money. You can read how I did for the first year here.

Yesterday, March 30, 2018, marked the last day of trading for the first quarter. So, how’d we do?

The Gartner Index returned a 1% return on investment, not including dividends, leaving me with $30,824.38 on my original $27,000 investment. As my Daddy used to say: No one ever went broke making a profit.

But, if you’re a follower of John Bogle’s advice at Vanguard, you’ve probably already guessed that the same $27,000 in the S&P 500 beat the supply chain index by $3,087.70, delivering a 6% return over the same period, leaving me with $33,912.08.

What was the difference? My supply chain index includes several retailers with exemplary – even renowned - supply chains, such as Inditex and H&M whose stocks were pummeled, along with consumer staples like Clorox, Coca-Cola and Pepsi, which treaded water. Meanwhile, the S&P now includes some of the major tech companies that have driven the market over the last six months, even if they are under pressure today.

That’s not to say that supply chains don’t count when it comes to stock returns. I think you can easily make the argument that in industries that are under pressure today, like retail, consumer packaged goods and food and beverage, an excellent supply chain is essential to delivering on the promise to the customer and minimizing stock slides. 

I’ll continue to monitor my portfolio and post a quarter by quarter tale of the ticker tape.