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.

The first quarter saw my supply chain investment make a 1% return, not including dividends. But, that was significantly below the 6% return delivered by the S&P 500. You can read the whole report here. June 29 marked the end of the 2018 second quarter. So, how’d we do?

The Gartner Index returned a paltry 0.01% return on investment for the second quarter, not including dividends, gaining just $223 for the three-month period. My original $27,000 is now worth $30,225.30. That’s a 10.67% portfolio increase since September 1, 2017. You could argue that nearly 11% isn’t a bad return. 

But, if you’re a follower of John Bogle’s advice at Vanguard, you’ve probably already guessed what comes next. My investment in the S&P 500 delivered a 2.75% increase for quarter, and increased in value by $958.09. My original $27,000 investment is now worth $34,870.17, for a 22.57% return since September 1, 2017.

What was the difference? I was surprised to see slack performance by some great companies, including some great CPG companies such as Kimberly-Clark, J&J and Pepsi. Retailers also took a hit, as did the electronics giant Samsung. 

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. One might argue that with their prices down compared to the overall market it’s time to take a flier. But with uncertainty about trade policies, tariffs and the unknown/unknowns, that might be too risky for my money.

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