Taking Stock

There are stock indexes galore: the Dow, the S&P 500, the NASDAQ Composite, the Wilshire 5000, the FTSE, and hundreds more. But how would an index of the stocks of companies that do a meaningful amount of cause marketing perform compared to those well-known indexes? Pretty well, as it turns out.

I first floated the idea of a stock index that would track companies that do cause marketing back in 2009. I tried to figure out Yahoo Pipes so that I could put the feed right into my own blog. But, alas, although my dad had geekiness to spare, with me it seems that the geek gene fell pretty far from the tree. 

So I talked to programmers to see if I could find someone who could feed the index into my blog, but the proffered solutions were always imperfect at best. 

Finally, I recently hired an MBA student to do it all in a spreadsheet, and what do you know but that over the last 15 years a basket of 25 cause-marketing stocks dramatically outperforms the Dow, the S& P 500, the NASDAQ Composite, and the Wilshire 5000. 



The index, which I call the Alden Keene Cause Marketing Stock Index, or the “Keene” for short, outperformed all those other major indices over the last 15 years. From Jan. 1, 1997, to Jan. 1, 2013, the Keene’s total growth rate was 342.21%. The Wilshire 5000 was the best-performing of the other indices that we tracked, and its total growth rate was 167.68%, less than half the growth of the Keene.

What does that mean in dollars and cents?

Well, if on Jan. 1, 1997, you had put $1,000 each into index funds that invest in the Dow, the S&P 500, the NASDAQ Composite, the Wilshire 5000, and the Keene, on Jan. 1, 2013, you would have had $2,032.18 in your Dow fund, $1,925.35 in your S&P fund, $2,676.82 in your Wilshire fund, $2,392.46 in your NASDAQ fund, and $4,422.07 in your Keene fund.

The Keene also trounces the other indices in other time frames as well. These numbers don't include any trading costs, and they assume that you reinvest all dividends. 

I don’t have the beta ratios yet, but in the down years of 2000 and 2001, the Keene lost less money than all the other indices in the comparison. In the down years of 2002 and 2008, the Keene lost less money than all but one other of the comparison indices.

Beta is a ratio that gives an indication of how much risk you’re taking on when you buy investments. So while you may get a higher return on your investment when you take on that higher risk, the beta ratio helps you understand if the reward was worth the risk. I’ll report on the beta ratios of the Keene when that study is completed.

Not surprisingly, since this is cause marketing we’re talking about most of the companies facing the consumer, like General Mills and Campbell. Consumer stocks are generally thought to be more recession-resistant than the market as a whole. 

But not all the stocks in the Keene face the consumer. Deere is in the Keene by virtue of its activity as a cause marketer. So, too, are tech stalwarts Adobe and HP, which are also active cause marketers. 

The stocks in the Keene index were developed based on two major “screens.” First, companies were screened for their commitment to corporate social responsibility, including corporate citizenship, governance, and workplace practices. 

The second screen was their activity as cause marketers. 

The result is a concentrated index of the stocks of 25 companies that have a reputation for walking their talk when it comes to CSR and cause marketing.  

And, as my study shows, returning outsized growth to their shareholders!

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