Consumers who don't like a company's politics can boycott their products. But ETFs trying to cash in on such conviction are having a tough time beating the S&P 500.
The 33 "worst of the worst" S&P 500 companies boycotted by the American Conservative Values ETF — including Target, Pfizer and AT&T — actually gained a collective $832 billion since being blacklisted. The ETF excludes these companies from its large-cap fund because it says they support "the liberal agenda."
But investing this way isn't panning out. Many of the stocks the ETF is boycotting are rising anyway. And the ETF, with just $52 million in assets, is lagging the S&P 500 this year.
"Mixing politics and investing can be hard as the end result is a portfolio of companies that may go up or down for reasons having little to do with politics," said Todd Rosenbluth, director of research at VettaFi.
The Boycott Dilemma
That's not to say the boycotts aren't making a dent in companies. It's just that profiting from them via the stock market is proving to be difficult.
For instance, the value of Anheuser-Busch InBev sank 16% since its controversial promotion in early April using Dylan Mulvaney, a transgender TikTok influencer. But Anheuser-Busch InBev isn't in the S&P 500, so it's not part of American Conservative Values' boycott.
The targets of the ETF's most recent boycotts — Target, Pfizer and AT&T — have lost money. Shares are down an average of 16% from the boycott, wiping out $80 billion in market value. The American Conservative Values ETF is up 15.2% in one year, slightly outperforming the 14.6% gain of the S&P 500.
"Hopefully the examples of Target and Bud Light reinforce the need for liberal corporate managers to focus on maximizing shareholder returns and stop playing politics," the ETF's co-founder, Tom Carter, said in a press release. " 'Go woke, go broke' is real."
Boycotts Not Sole Driver Of S&P 500
But overall, stocks react to more than just the political leanings of companies. And being on the wrong side of the trade can than erase more than any gains. American Conservative Values excluded Apple starting in Jan. 2021. But thanks to a big-cap tech rally, shares are up nearly 50% since then. Apple's gain since the ETF's boycott is more than $815 billion — making it the S&P 500's top value driver.
"Stock prices likely do not take into account the political contributions of the company and (are) driven more by a company's earnings, dividends and other fundamental metrics," Rosenbluth said.
And the data shows this out. The American Conservative Values ETF is up just 11.7% this year, lagging the 13.8% rise of the S&P 500. And get this: It's in a near tie with the 11.9% Democratic Large Core ETF, which invests in companies that donate money to more left-leaning programs. Meanwhile, the Point Bridge America First ETF, which financially supports right-leaning programs, is down 0.1% this year.
Just Another Flavor Of ESG?
ETFs supporting right-leaning programs are a natural backlash to ESG investing. In ESG investing, funds bulk up on shares of companies seen paying attention to environmental, social and governance issues.
But ESG, too, has turned into a lightning rod of criticism. And it's a reminder of the dangers of mixing portfolios and politics.
"While few people like the term ESG and some have turned the investment approach into a political issue, most people prefer to focus on traditional investment products that charge modest fees," Rosenbluth said.
So rather than paying the 0.75% fee of American Conservative Values or the 0.45% for Democratic Large Cap Core, just buy the SPDR Portfolio S&P 500 ETF for 0.03% and donate your savings, Rosenbluth suggests.
"You could save money and contribute to the political causes that matter most to you," he said.
Boycott Scorecard
How the most recently excluded companies from the American Conservative Values ETF are faring
| Boycott date | Company | Symbol | Boycott change | Sector |
|---|---|---|---|---|
| 5/24/23 | Target | -10% | Consumer Staples | |
| 1/27/23 | Pfizer | -18.0% | Health Care | |
| 1/27/23 | AT&T | -21.1% | Communication Services | |
| 1/27/23 | UnitedHealth Group | -3.7% | Health Care | |
| 10/14/22 | PayPal Holdings | -21.2% | Financials | |
| 10/14/22 | Visa | 23.4% | Financials | |
| 6/29/22 | Netflix | 132.2% | Communication Services | |
| 4/26/22 | Warner Bros. Discovery | -42.1% | Communication Services | |
| 8/26/21 | American Express | 2.2% | Financials | |
| 8/26/21 | Bank of America | -33.4% | Financials |
Sources: American Conservative Value ETF, IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
