Investing in Familiar Companies
Investing in the stock market is big business for most investors and the financial advisors who work with them to determine which stocks to buy.
But, some investors invest because they believe in the company and the service or products it offers.
Whether investing in a company with a familial tie, or investing in a company that offers a product or service that is familiar and popular, investors indicate a strong interest in investing in companies they know as a consumer.
In Spectrem’s monthly research with wealthy investors, it asked in July “do you prefer to invest in companies you know as a consumer?” and 67 percent of all investors said yes. The percentage actually grows among Professionals (dentists, doctors, lawyers) to 78 percent, and 73 percent of investors who profess to be very knowledgeable about investing and finances said the preferred to invest in companies they know as a consumer.
That’s very revealing for advisors. While investors often invest in companies they now little about in terms of the products and services they offer, advisors can promote individual stocks they like to investors by promoting the familiarity of that company. Automobiles, technology, and entertainment are areas where investors are often consumers and know which companies they like and which they do not like.
Uniquely, those investors who are business owners were least likely to say they wanted to invest in companies they are familiar with. Only 50 percent provided a positive response to the question.
The 800-plus investors surveyed were offered a list of 10 companies which most consumers are familiar with and given a hypothetical $100,000 to invest in any companies they liked. The most popular choice among the companies offered was Amazon, selected by 58 percent of investors, followed by Apple, chosen by 43 percent.
There are probably not many investors who have not used either Amazon or Apple in their daily lives. But those companies are also extremely successful and are among the most popular stock choices in the American market.
On the opposite end of the scale, Twitter was selected by only 1 percent of investors, and Uber was chosen by only 5 percent. Uber, the ride-sharing company used by millions of Americans, created a stir earlier this year when they created an Initial Public Offering at $42 per share but the stock has failed to maintain that level in its first few months.
When investors were segmented by occupation, 69 percent of Professionals were willing to invest in Amazon and 59 percent were willing to put money in Apple. Among investors in the field of Information Technology, 44 percent would invest in Google and 15 percent would invest in Facebook, both the highest percentage in occupational segmentation.
And, interestingly, 20 percent of Educators said they would invest in Starbucks.
©2019 Spectrem Group
Keywords: investing, investors, advisors, Spectrem, companies, Amazon, Apple, Google, Uber, Starbucks, Professionals, Educators