Hatch Weekly: The hottest stock market right now

Calling time on sin stocks?

You know those controversial immigrant detention centres near the US border with Mexico? You just might be backing them inadvertently through your ETFs, or directly, as the companies who run them are publicly listed.

Value investing 2.0

We’re not talking value investing in the traditional sense, but rather, using your values to influence the way you invest. Publicly traded prison owners CoreCivic (CXW) and GEO Group (GEO) might be in your portfolio as Vanguard and BlackRock are two of their largest shareholders, but they’re not the only ones. State Street Global Advisors’ SPDR series of ETFs and Prudential (PRU) are also significant investors in the owners of prison centres. Due to political - and potentially public - pressure, Corporate America is distancing itself from supporting their controversial practices. Big banks like Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC) are all stepping away from lending money to detention centres. We wonder if prominent fund managers will follow suit?

Responsible investing has set up camp

Momentum is growing, especially among millennials, to put their money where their values are, so we anticipate fund managers will continue to create new ways for people to invest in the world they want to live in.After a series of mass shootings in America over the past few years,BlackRock and other fund managers evaluated their holdingsin American Outdoor Brands (AOBC), formerly known as Smith & Wesson, and Sturm Ruger (RGR). In response to continued pressure, BlackRock is rolling out new funds that exclude gun makers and retailers. According to Vanguard, prison shares only make up a small portion of their portfolios but also feel that removing all controversial shares from their funds would be impractical. When you’ve got a passive strategy and over 20 million customers, we can see how it’s challenging to address varied social, political, and environmental views.

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GE misses the boat on clean energy

General Electric (GE) has announced the end of their California gas plant 20 years ahead of schedule.The Inland Empire Energy Center in California is uneconomical to support because of its outdated technology. The American giant is finally trying to prove they’re on board with clean energy in hopes of getting back the tens of billions of dollars of investor money they lost in the past few years.

Hindsight is a real glitch

Founded in the late 1880s by a guy you may have heard of – Thomas Edison – General Electric was one of the 12 companies offered on the Dow Jones when it was created in 1896. GE might be an energy company, but it has at least 34 subsidiaries, including companies that deal with aviation tech, health care, and financial services. The company’s more serious troubles kicked off in 2014 when they announced the purchase of Alstom, a French gas turbine company for $13 billion. Why the big deal?Because of the bad timing: the purchase coincided with a massive shift in climate policy, and was completed in November 2015, one month before the ratification of the landmark Paris climate agreement in December 2015. Yikes. Add to this a global plunge in renewable energy prices (think wind and solar), and you’ve got less demand for the gas turbines they had just bought.

There’s a price to pay for investors

According to IEEFA’s most recent report, GE lost a whopping $193 billion in market value between 2016 and 2018. They quickly went from bringing in $4 billion in profits in 2016 to losing more than $800 million in 2018. How did the Dow respond? They said goodbye to GE after 110 years on the index after the share was its worst performer in 2018. GE’s downfall isn’t all about its lack of foresight on clean energy though.CEO Jeff Immelt has a lot to answer for and his successor John Flannery was removed by the board a year later. Experts chalk up GE’s woes to a combination of bad luck and bad decisions, but maybe it’s also a bit of karma for looking the other way when it came to climate change.

The hottest stock market: sneakers (we’re not kidding)

Yup. StockX, a site that takes coveted consumer goods like sneakers, and turns them into tradable commodities, is killing it. Two years ago, Nic Wilkins started selling some of his sneaker collection online to make some extra cash while he was studying. This year he plans to move 10,000 pairs of shoes, and his take will be 25% profit from over $1 million in sales. Smooth.

Sneaker trading for dummies

Sneaker collecting and trading is a growing business that is turning sneakers into a currency. StockX’s contemporaries GOAT Group, Stadium Goods, and Bump have raised more than $200 million in venture capital funding. Last Wednesday, StockX told reporters it hired a new chief executive to expand its business, and that it had secured $110 million in capital.The company is now valued at more than $1 billion, so it’s no surprise that traditional sneaker retailers and brands are coming to the party. In February, Foot Locker (FL) invested $100 million in GOAT Group. A few months earlier, luxury site Farfetch (FTCH) acquired Stadium Goods for $250 million. Apparently, the market for resale sneakers in North America is projected to reach $6 billion by 2025. Reselling is an industry of itself – just look to TheRealReal’s IPO success last week as further proof.

What does Nike think?

Nike’s (NKE) CFO said in March that the company wasn’t interested in reselling and had no partnership plans for it. In fact, they poked fun at the resale market last November with the release of $160 Jordan 1s that bore the messages: “WEAR ME,” “PLEASE CREASE,” and “NOT FOR RESALE.” The trolling backfired because their Jordan 1s showed up on StockX and promptly sold for prices as high as $1,000. But Nike has better things to spend their time on, like selling new sneakers and sports gear to help boost Q4 revenues by 4% to over $10 billion. And women are partly to thank, Nike said as its women’s business was up double-digits for the year and is accelerating thanks to tapping into new digital distribution channels. Their share price is up about 17% over the past 12 months, bringing Nike’s market cap to around $131.4 billion.

Other interesting stuff

The World’s Top Stock Market? Right Now, It’s Russia
Here are the stock market’s winners and losers in the first half of 2019
Secondhand fashion site TheRealReal soars on Wall Street debut
Jony Ive: 8 hits and 8 misses from 20 years at Apple
A terrifying app for making any woman appear naked was killed off by its creator

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