“The stocks of companies that have women as board directors or lesbian, gay, bisexual and transgender employees in senior roles outperform the ones that do not, according to a recent report.”

-Credit Suisse

Most of us have a better shot at hitting the jackpot playing slots in Las Vegas than getting rich stock-picking.  However, in honor of Gay Pride Month, I am coming out with one of my favorite high conviction stock investing ideas.

Big Gains with Gay Execs

Over the last decade, stocks in companies that have LGBT individuals in senior executive positions have demonstrated an excess compound annual growth rate of 3.4% above and beyond the MSCI All-World Index.  I’ll call this the “gay alpha.”

Back of the Napkin Math

The MSCI All-World Index returned 5.13% over the last 10 years.  However, the LGBT-friendly index returned 5.13% + 3.4% (gay alpha) = 8.53% over 10 years.

$1M turned into $1.6M in the Index, while $1M turned into $2.3M in LGBT-friendly companies.  That’s an extra 44% over 10 years.

Profitable Corporate Cultures

Having a reputation as a company that is inclusive attracts a larger pool of quality applicants and helps filter out intolerant job seekers who poison otherwise productive teams.  These companies focus on recruiting and rewarding talented individuals based on their ability to help grow their companies into profitable behemoths.  More importantly, these companies avoid mediocre workers who had gotten ahead by conforming to cultural norms.

Steve Jobs used to say “think different.”   While stagnant companies see the world as it was, innovative companies see the world as the better place it will become.

How to Cash In

Profiting from the “gay alpha” means identifying the small percentage of companies that meet these criteria.  Fortunately, there is an easy option.  Motif Investing allows you to invest in ideas like “gay-friendly” or “cloud computing” or “clean energy” with a suggested basket of up to 30 stocks for $9.95.


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