MARKET COMMENT
Fifteen Shares For The Long Run

By Maynard Paton (TMFMayn)
September 15, 2004

Which industries should you invest in for the long run? History suggests a selection of old economy favourites.

The following table lists the five best and worst sectors since the start of 1986, when the vast majority of current FTSE sector indices were rebased to 1,000. For the record, the FTSE All-Share index has increased by 231% (or 7% per annum) in the last eighteen or so years.

Despite cigarette consumption contracting for years, Tobacco surprisingly tops the list. But there's no real shock to see market stalwarts Banks and Oil & Gas having outrun the main index. And following a good run of late, Mining also makes the cut.

The only 'growth' sector to make the top five is Pharmaceuticals and Biotech. Indeed, it's quite enlightening to see how other growth sectors have underperformed.

For instance, Support Services has reported a 192% gain since 1986, while Telecommunications and Software & Computer Services have registered a 163% gain and an 89% gain respectively. However, spare a thought for devout followers of the Info Tech Hardware index, which is now lower than it was eighteen years ago.

Property is another surprising disappointment, with both the Real Estate and Construction & Building Materials indices lagging the main market. Since 1986, the former has improved 198% while the latter has increased 190%.

And beware, some traditional industries do not provide a long-term portfolio guarantee. Old economy areas left well behind over the years by the All-Share include Transport, Chemicals, Engineering & Machinery and the biggest loser of the lot -- Insurance.

Still, a spread of shares from the top five sectors should not disappoint over time. Sadly there are no sector trackers to speak of, but those tempted to buy and hold with the winning industries of yesteryear will get a representative performance from the following portfolio:

Tobacco: British American Tobacco (LSE: BATS), Gallaher (LSE: GLH), Imperial Tobacco (LSE: IMT)
Banks: Barclays (LSE: BARC), HSBC (LSE: HSBA), Royal Bank of Scotland (LSE: RBS)
Pharmaceuticals:  AstraZeneca (LSE: AZN), GlaxoSmithKline (LSE: GSK), Shire Pharmaceuticals (LSE: SHP)
Mining: Anglo-American (LSE: AAL), Rio Tinto (LSE: RIO), BHP Billiton (LSE: BLT)
Oil & Gas: BG (LSE: BG.), BP (LSE: BP.), Shell (LSE: SHEL)

Maynard owns shares in GlaxoSmithKline.