The 2012 elections promise to be a watershed event for the country and for investors. As the U.S. faces a fiscal cliff from expiring tax cuts as well as a soaring budget deficit, who wins in November's elections will inevitably have a huge impact on the financial future of the nation.
One company, though, is more concerned about how it can help investors navigate the complex trends that are tied to so many of the most controversial and debated political issues. With many of the issues it has identified, investors on both sides of the aisle have been able to profit, and that's likely to remain true no matter what happens in November.
Later in this article, I'll reveal what this company, Motif Investing, has discovered about investing and politics. First, though, let's take a closer look at the company itself and its blending of investment analysis and social focus on its customers.
A different way to invest
Motif Investing is a relatively new company, but it's already making a splash in the investing world. Its novel way of looking at investing themes via what it calls "motifs" marks a departure from the direction that exchange-traded funds have taken investors.
In particular, specialized ETFs tend to focus on certain industries or investment strategies, with the intent of giving diversified exposure across different stocks within each area. Even Folio Investing, which uses its folio concept to create baskets of stocks, tends to stick to established sectors in creating its ready-to-go folios.
Motif, on the other hand, focuses on broader concepts and then chooses companies from across the different sectors of the economy to represent those concepts and the economic trends that track them. Moreover, it encourages its customers to make whatever changes they want to existing motifs, customizing them for their own particular analysis and beliefs.
Motif recently turned its attention to how investors can use political trends to develop profitable strategies. It identified a number of issues of importance to voters and investors alike, including health care, energy policy, government lobbying, and domestic economic growth. It then took motifs related to those issues and looked at how they've performed during the past year as the election cycle has run its course.
Rather than predicting who's likely to win in November, though, the results emphasize the political rift among U.S. voters. Perhaps the most telling comparison comes from Motif's look at companies making major donations to each political party. Google (Nasdaq: GOOG ) and Microsoft (Nasdaq: MSFT ) are among companies tracked by the "Democratic Donors" motif, which has soared nearly 40% in the past year. Yet far from suffering, the corresponding "Republican Donors" motif has gained almost 30% in the same period, including such stocks as Las Vegas Sands (NYSE: LVS ) , Goldman Sachs, and ExxonMobil (NYSE: XOM ) .
Some motifs focus on issues aligned with party platforms. For instance, the Republican-leaning "All-American" motif of companies with purely U.S.-based sales rose 27% over the past year. Meanwhile, the Democratic-leaning "Betting on America" motif of companies boosting their investment in U.S. operations, including Sprint (NYSE: S ) , was up 25%. Similarly, the "Repeal Obamacare" and the "Senior Care" motifs both produced better than 20% returns despite Motif's putting them in opposition to each other.
What we can agree on
Motif CEO Hardeep Walia admitted that his company's political motifs aren't a perfectly scientific way to track politics. But he describes it as an important way to begin the process of thinking about the election in pragmatic terms related to your own investing. "There are a lot of issues to be decided in this election," Walia said. "Diving into the issues using Motif is step one."
It'll be interesting to see how the actual results of the election affect the respective motifs on both sides. From my perspective, though, it's encouraging so far to see that despite deep political divisions among Americans, the competing motifs show that there are ways to make money while staying true to your beliefs -- no matter what your political views may be.
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