Making Long-Term Investments In Declining Industries

Many of you are aware that tobacco stocks have been excellent investments despite experiencing a simultaneous drop in sales growth that hampers the industry on an annual basis. If you were contemplating an investment in the old Philip Morris in 1981, and you were informed that cigarette sales would decline by 3.5% annually between 1981 and 2015, would you still be interested in making the investment? Would you have any idea that the investment would go up to deliver 20% annual returns from that point forward, giving you an ownership position in Philip Morris International, Altria, Mondelez, and Kraft-Heinz?

A similar story has played out for railroads. In 1900, the railroad industry represented 63% of the American stock market. If you were a dividend investor in 1900, it almost certainly meant that the bulk of your wealth would be coming from railroad dividends. And yet, railroads currently make up less … Read the rest of this article!