In the mid 1950’s a mutual fund family was approached by a convent of nuns who had a couple million dollars to invest. Because of their religious beliefs, they didn’t want any of their money supporting businesses involved in the sale of alcohol, tobacco, or gambling. The fund family had no existing offerings that qualified so they decided to create a new fund for the convent, one which exists to this day. It was an early attempt at a socially responsible fund, created long before they were popular. I suspect few who own this well-known fund even know it still bans investing in those types of companies.
I have written a few times this past year about the new millennial investor, and their impact on the markets. I mentioned that I grew up analyzing companies for profitability and invested accordingly. About a decade ago, we started getting more inquiries from clients regarding the specific products and services of the companies we invested in. Like the nuns of the 50’s, they seemed more interested in social values, politically correct attitudes or diversity of management than revenue and profit margin. I thought for a while that it was an anomaly, but in recent years the trend has become more mainstream. Especially with younger investors, we are often seeing them more concerned about how their money is being used to make the world a better place than about profits.
A decade ago, a retail video gaming company named Gamestop (GME) was a favorite among the young generation. Now, facing bankruptcy due to changing markets, the company came under attack from a couple of hedge funds attempting to profit from driving it into the ground by short-selling its stock. Enter a massive group of mostly millennial investors who were determined to save their beloved Gamestop from what they viewed as evil hedge fund billionaires. Numbering over two million, this digitally connected army bought up millions of shares of GME, sending the price through the roof and the Hedge Fund managers into a panic.
Though the resulting battle made for good T.V., beating up a few hedge fund investors may not hurt many others. In fact, many investors began hoping the stocks they owned would be the next target. What’s more important for most investors is how this might change investing going forward. If you combine the socially responsible attitudes of many millennial investors, with the access to easy trading platforms and a connected army of like-minded people, we could be seeing a lot of more of this type of investing behavior.
I favor value-based investing. But value isn’t measured solely in monetary terms. Millennial investors place a high value on social issues. As their wealth increases, their ability to support the companies and causes they believe in will increase as well. Investors of the future may find good opportunities looking outside the traditional valuation models and consider those companies that this powerful younger generation will be looking to support.
Wyson Financial | Wealth Management in Southern Utah
Financial Planning and Investments
