February 27, 2007

Bet on a sinner, come up a winner

What are today's "sins" have, over the past 50 years, have come out big winners in the investment world. Philip Morris, maker of cigarettes and beer -- and over the years creator of many a cholesterol-fest -- has proved what I have always thought to be true about your average financial crisis.

Say you worked for a great magazine that folded. Here today, then it's history. Staff reaction? When the going gets tough, the nondrinkers start drinking; the nonsmokers start smoking; everyone eats as if food is going out of style; and curious sexual liaisons result. (If Philip Morris were in the condom business, they would then have all the basics covered.)

Alice worked during the part of the economic cycle immediately preceding the 1990-1991 recession ; her employer, a trendy magazine, outdid the competition. It was so trendy, it folded before all its contemporaries in the late 1980s-early 1990s. The net result for the "sin stock" investor? Vice is nice.

The Wall Street Journal will note on March 1 that the S&P 500, considered a widely representative of the stock market as a whole (it has 500 stocks, versus the 30 that comprise the Dow Jones Industrial Average), has had its 50th "birthday." In that time, according to the authors, the best performing stock that started in the S&P and continues to this day is -- Philip Morris.

Known today for P.R. purposes as "Altria Corp.," the stock, if you had had $1,000 to invest in it in 1957, in the non-PC days when it was Philip Morris, would have returned almost twice as much as the rest of the annual return of the entire S&P index.

In other words, if Mom and Dad smoked Marlboros and put their money not only where their mouths were but where the cash was going, "an investment of $1,000 put into Philip Morris in 1957 would have grown to $8.4 million by the end of 2006 -- compared to a mere $168,000 accumulation in the S&P 500 itself."

Who says smoking doesn't pay?

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2 Comments:

Blogger The Misanthrope said...

That just depresses me. Do you have any tips now that will pay off in 15 years?

7:42 PM  
Anonymous Heatherg said...

oo, I wanna a tip!
I wanna tip!

Heatherg jumps up and down raising her hand wildly.......

8:58 AM  

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