Over the last decade, the S&P 500 stock index has delivered a total return figure of just over 6% to investors -,not a very impressive number. With the benefit of hindsight, investors could have chosen certain industries that would have led to more stable returns to match more historical stock market returns.

TUTORIAL: 20 Investments Worth Watching

Over the long haul, stocks have returned about 10% annually, so industries that have returned close to this level should qualify as more stable than the market overall. And since this has been a peculiar decade that began with the bursting of the dot-com bubble, any industry that has outperformed the market likely qualifies as pretty stable. Here is a list of the five most stable industries and an underlying stock that qualifies as the industry bellwether and a key driver to the stable returns. (To help you choose a stock with long-term success, read How To Make A Winning Long-Term Stock Pick.)

1. Basic Materials
The processing of raw materials certainly rises and falls along with overall economic activity. As the name implies, the sector forms the basic ingredients for the construction of buildings and the creation of products including plastics and metals that use basic chemicals and metals as an input to creating the final good.

The rapid expansion of emerging markets over the past decade likely explains why companies in this space have been more stable than the market overall. An industry bellwether is Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), one of the foremost global miners and an explorer for mineral resources. Its stock is up nearly ten-fold over the past decade and it is the largest holding in the iShares Basic Materials ETF (NYSE:IYM). Its strong performance has helped make the basic materials space the best performing industry over the past decade with a return of about 100%.

2. Transportation
Transporting goods across the country is another economically sensitive industry. With two severe recessions over the past decade, it doesn't make much sense that this would be one of the more stable investment spaces over the last ten years. However, the top holding in the Dow Jones Transportation Average Index Fund (NYSE:IYT) is leading domestic railroad operator Union Pacific Corp. (NYSE:UNP). Steady industry consolidation has turned the nation's largest railroad providers into solid investments. Having fewer players has meant industry pricing power and a service that competes extremely well with the trucking industry. Union Pacific's stock has experienced nearly a four-fold increase in its stock price over the last decade and, as the largest holding in the Dow Transportation Index, this explains much of the index's 80% return over this period.

3. Consumer Goods
With about a 70% total return over the past decade, the consumer goods space is a logical candidate for underlying companies that qualify as stable. Consumer goods are the end result of taking basic materials and making them into food, clothing and related necessities. They also include more economically sensitive merchandise such as jewelry and automobiles, but consumer spending drives an estimated 70% of the U.S. economy. As a result, demand is relatively steady overall.

Procter & Gamble is the undisputed industry bellwether and also the largest company in the iShares Dow Jones U.S. Consumer Goods Sector Index Fund (NYSE:IYK). P&G's share price has more than doubled over the last ten years. (To help you identify growth stocks, check out Steady Growth Stocks Win The Race.)

4. Technology
The technology space was the most severely impacted by the dot-com bubble earlier this decade. As a result, the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE:IYW) has only returned about 20% over this timeframe. But overall, demand has been solid and increasing over time as business continues to migrate to the internet and digital technology becomes a greater influence on the lives of companies and individuals.

Apple (NYSE:AAPL) is currently the largest weighting in the Dow's technology index. Its meteoric rise from share price lows of around $7 seen in 2003 to a current level just less than $330 per share doesn't qualify it as a stable investment. But it certainly qualifies as an industry bellwether and has contributed to industry performance that counts as more stable than other industries and the stock market as a whole.

5. Healthcare
Like basic consumer goods, demand for healthcare is something that can be counted on regardless of the economic environment. Over the past decade, the iShares Dow Jones U.S. Healthcare Sector Index Fund (NYSE:IYH) has returned only about 10% in total. One would think annual returns would have been a bit higher and steadier, but this is still ahead of the market. The more subdued returns of the index overall could very well be attributed to company-specific issues at Johnson & Johnson, which has the largest weighting in the index. Going forward, returns should turn out to be more stable, as should be expected in the industry and because of aging Baby Boomers in the United States.

The Bottom Line
It's only logical that the most stable stocks exist in industries that are somewhat recession-resistant and not as influenced by ups and downs in the business cycle. Over the past decade, this has rung true for consumer goods and healthcare. But demand plays an important role and the last ten years have been marked by strong trends for basic materials and technology. The transportation industry has been a standout due to the strong performance by the railroad industry, which itself has been stable due to factors specific to the industry. Add it all up, and the above industries and respective industry bellwethers have qualified as the most stable since mid-2001. (To discover if long term investing if right for you, see Long-Term Investing: Hot Or Not?)

Disclosure: At the time of writing Ryan C. Fuhrmann did not own shares in any company mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  2. Fundamental Analysis

    3 Long-Term Investing Strategies With Strong Track Records

    Learn why discipline and a statistically valid investment strategy can help an investor limit losses and beat the market over the long term.
  3. Stock Analysis

    Analyzing Baidu's Return on Equity (ROE) (BIDU)

    Find out how Baidu's return on equity (ROE) compares to industry peers and historical results. See how DuPont analysis treats net margin, asset turnover and leverage.
  4. Mutual Funds & ETFs

    The 5 Best US Small Cap Value Index Mutual Funds

    Find out which index mutual funds do the best at investing in small-cap value stocks for higher potential returns at the lowest cost.
  5. Investing

    New Year, New Investing Strategy: Exploring ETFs

    Whether you’re a seasoned investor or new to the markets, you need to learn as much as you can about the present environment and how to navigate it.
  6. Mutual Funds & ETFs

    3 Legg Mason Mutual Funds with Long Track Records (LM)

    Discover three Legg Mason mutual funds with long track records. Read a summary of each fund, as well as performance and manager information.
  7. Mutual Funds & ETFs

    The 4 Best U.S. Equity Index Mutual Funds

    Find out which four index mutual funds are among the best U.S. equities index mutual funds for core holdings in your investment portfolio.
  8. Mutual Funds & ETFs

    The 4 Best U.S. Large Cap Index Mutual Funds

    Discover the top four mutual funds that use passive investment approaches and follow stock indexes composed of U.S. large-cap equities.
  9. Mutual Funds & ETFs

    The 4 Best U.S. Fixed Income Index Mutual Funds

    Discover the top four fixed income mutual funds that follow passive investment strategies by tracking the performances of various benchmark indexes.
  10. Mutual Funds & ETFs

    The Top 5 All Cap Core Mutual Funds for 2016

    Learn how to shop for the best all-cap mutual funds, and identify five funds that invest in companies of all sizes and offer good returns with low expenses.
RELATED FAQS
  1. Have hedge funds eroded market opportunities?

    Hedge funds have not eroded market opportunities for longer-term investors. Many investors incorrectly assume they cannot ... Read Full Answer >>
  2. What fees are associated with target-date funds?

    Target-date funds have two types of fees. The first type of fee is paid to the company managing the fund and selecting the ... Read Full Answer >>
  3. Some of the Best No-load Funds to Consider

    Some of the most well-known no-load funds are the DoubleLine Total Return Bond Fund (DLTNX), Vanguard Short-Term Investment-Grade ... Read Full Answer >>
  4. Can mutual funds fail?

    Mutual funds can fail. Unlike bank accounts, there is no Federal Deposit Insurance Corporation (FDIC) or similar agency that ... Read Full Answer >>
  5. How do mutual fund managers make money?

    Mutual fund managers get base salaries, which vary greatly depending on the size and pedigree of the fund company. They may ... Read Full Answer >>
  6. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center