There’s a hot trend in the investing world.
It’s harmful. It could cost you money. And, frankly, the logic is 100% backward.
Blame the millennials. Blame ignorance of how the stock market really works. Or blame the media.
They’re all guilty.
Just don’t blame us if you invest in a “socially conscious” fund or stock and don’t get rich and don’t change the world.
Morals vs. Money
On Friday, we wrote you about an intriguing new trend in the banking sector.
Banks and credit card processors are turning your account records into big data… and big business.
As a privacy wonk, we don’t like the idea. It’s quite dangerous.
As an investor, the potential is obvious.
It leads to a conundrum. Do we invest in companies that do a few things we don’t like?
The average fella these days would skip it. He’d add company X to his enemies list, tell his friends to boycott it and go to bed proud of himself at night.
He’s not only harming himself… but making the problem worse.
Own the Company
Here’s the deal. When we buy shares of company X, we’re not sending a check directly to its corporate treasury to sponsor the activities we dislike.
We’re buying our shares from another shareholder.
We’re not funding the company… We’re becoming an owner.
And owners get to vote.
They get to hold management accountable.
And they get to go to meetings.
But there’s another angle you may not have thought of. It’s what happens when somebody else buys the shares we refuse to buy.
This is important.
When you don’t buy shares, the other guy gets to vote… He gets to go to meetings. And he gets to run things the way he wants.
And if that person pushes for ideas you don’t stand for, tough luck. He’s a shareholder, and you’re not.
“But I Own Only Five Shares…”
Of course, the typical company has millions of shares, and we’ll own just a sliver of them. It’s quite unlikely the average American will ever be a majority shareholder at a publicly owned company.
Again, we have to think differently… outside the mainstream.
Take a look at coal, gun or cigarette stocks.
They get a lot of bad press. Lots of Americans stay away from their products, and lots of “socially responsible” investors have shunned their shares.
But has it helped or hurt?
Have any of them changed their ways because folks boycott… or, with the naysayers out of their ranks, do they do more of the “harmful” stuff because that’s what their remaining shareholders want?
Sure, we can skip owning a stock that does a few things we don’t agree with. But 1), we certainly won’t make any money, and 2), the company will then be owned by an army of folks who think and act contrary to our own beliefs.
In other words, we’ll financially harm ourselves and actually promote more of what we stand against.
A Divided Nation
It’s this misguided, feel-good “boycott” culture that has gotten our nation in so much trouble lately.
We disagree with something… so we shun it.
It divides us and destroys any sense of compromise.
Take all this “virtue signaling” we’ve talked about recently. Most of it is marketing horse hockey… but it works. It attracts legions of folks who think and feel the same way the company supposedly feels. And at the same time it repels the folks who don’t feel that way.
It doesn’t take long, though, before there are enough protagonists coming in the front door to far out-monetize the effects of the antagonists going out the back door.
Our conversation about Dick’s Sporting Goods last week is a good example.
The company banned so-called assault rifles from its stores. The gun crowd fled in angst… but the gun takers gladly took their spot.
Now it’s an anti-gun brand, and we’re going to get a whole lot more of that sentiment.
It’s no different with stocks.
That’s what so many folks are missing.
They’re taking America’s “boycott everything” culture to Wall Street – the last place it belongs.
If you don’t like something a publicly traded company is doing, don’t shun it from your portfolio. Don’t punish your wealth and your financial Liberty.
Buy the company. Become a shareholder. And have a voice in what the company does.
Remember… activism means being active. It doesn’t mean passively boycotting.
After all, if you don’t own shares, who will?