Put Your Money On Manufacturing

In my most recent "Just In Time" column, I talked about how the IW 50 Best Manufacturing Companies have outperformed the S&P 500 companies in terms of average annual shareholder return. Based on a study conducted by Deloitte Consulting, the group of manufacturing-only IW 50 companies did better by a 2-to-1 margin compared to the S&P 500 companies, which includes banks, insurance companies, retailers and other services providers in addition to manufacturers.

Deloitte's initial analysis looked at the companies that were on the IW 50 list last year (i.e., 2005 numbers), so I sent along the fresh list of companies that are on the brand-new IW 50 list (which is based on 2006 numbers). While the gap between the IW 50 and the S&P 500 narrowed somewhat -- 22.2% vs. 15.2% -- take a look at the 3-year, 5-year and 10-year trends in the accompanying chart. Clearly, these manufacturing companies not only offer substantial value to their shareholders, but they are outperforming the S&P 500 at such an accelerated pace that you tend to wonder why Wall Street is so fixated on "next big thing" type companies. Seems like the real growth is coming from the old-guard manufacturing sector.