The Kids Are Alright: How to Profit from the Rise of Millennials
This past weekend, I tried getting my Millennial daughter to focus on watching a DVD of a movie “essential.” She’s a bright and college-educated young woman, but my explanations as to why Citizen Kane is a masterpiece fell on distracted ears. A black-and-white film from 1941 couldn’t compete with the incessant pinging of her smartphone.
But it would be a mistake to dismiss Millennials as a bunch of slackers. This generation thinks, behaves and shops in new and exciting ways — and their economic clout is exploding. Wall Street has come to the same conclusion, which is why analysts and companies have Millennials in their sights.
Below, I highlight the optimal play on the burgeoning influence of Millennials, which is one of the strongest investment themes that you can find.
Changing the way the world works…
According to transcripts this earnings season from the research firm FactSet, increasing numbers of companies are getting questions during conference calls from analysts who pointedly want to know how they are targeting their products and services toward money-spending Millennials.
As FacetSet puts it: “Frequently associated with the rise of smartphones, social media, and ‘selfies,’ the Millennial generation’s reliance on technology and access to information has changed the way the world works.”
The Millennial generation, born between 1980-2000, is now the largest generation at over 77 million and already outnumbers Baby Boomers, who are their parents. Millennials are widely perceived as pampered and self-entitled, largely because they’ve been praised too often by their Baby Boomer parents (I plead guilty). But Millennials also boast the highest buying power of any generation, making their mind share a coveted prize among advertising and marketing agencies.
Millennials are highly educated; 61% of those at adult age have attended college. Millennials grew up with the Internet and are shaping how today’s world eats, socializes, shops, communicates, and speaks. With the advent of social media hashtags and “flash mobs,” Millennials also are reshaping political protest.
Many Millennials came of age during the Great Recession of 2008-2009, and while they are not the first generation to suffer through a severe economic downturn, they used the experience to revolutionize the job market.
A wave of bloggers, freelancers and social media influencers helped rethink the meaning of education and work, giving rise to the “gig” economy that liberates workers from the conventional strictures of corporate life. Their habits as consumers changed the retailing landscape as well, boosting e-commerce retailers and clobbering Big Box stores.
As the greying Boomers retire and downscale their lifestyles, the Millennials are becoming the leading force in the consumer market. Many Millennials with high levels of education are following career paths that lead to solid paychecks, making them the core target for consumer brands.
Leveraging demographics into dollars…
Rather than pinpoint specific companies geared toward Millennial sensibilities, the safest and easiest bet is to buy shares of Global X Millennials Thematic ETF (MILN), an exchange-traded fund launched in May 2016.
With $6.1 million in assets, MILN focuses on the distinctive consumer habits of Millennials. Accordingly, the fund emphasizes e-commerce over conventional retail, wholesome food purveyors over fast food, travel “experience” web sites over luxury goods, mobile payment platforms over cash, etc.
As you’d expect, MILN is heavily weighted toward Internet stocks, which have been on a tear so far this year. The fund’s top 10 holdings (31% of total assets) are PayPal (NSDQ: PYPL), Expedia (NSDQ: EXPE), Intuit (NSDQ: INTU), Alphabet (NSDQ: GOOGL), Facebook (NSDQ: FB), Amazon (NSDQ: AMZN), Priceline Group (NSDQ: PCLN), Nike (NYSE: NKE), Fiserv (NSDQ: FISV), and V.F. Corp. (NYSE: VF).
Many of the fund’s holdings include brands beloved of Millennials. As FactSet points out in a recent survey: “More than half of Millennials say they are extremely loyal or quite loyal to their favorite brands.”
By percentage of total assets, the fund’s top five sector weightings are consumer cyclical (53.3%), technology (21.2%), real estate (10.4%), consumer defensive (6.2%), and financial services (5.3%).
MILN has returned 13.3% year to date and 16.8% over the past year. The expense ratio is a reasonable 0.68%.
Millennials are fueling technological change, through social media and other online activities that compel companies to keep up with these young and restless consumers. Millennials seem to have a knack for getting companies to innovate sooner and scale faster to reach their generation in new and compelling ways.
And just maybe, as they mature into parenthood, Millennials will discover the joy of turning off their smartphones and relaxing in front of an Orson Welles classic. There’s bound to be a future marketing angle for that behavioral change, too.
Send your comments and questions to: firstname.lastname@example.org. I reserve the right to edit letters for the sake of clarity, concision and civility. — John Persinos
The only pure “Trump play”…
As I’ve just explained, the rise of the Millennial generation is an accelerating investment theme. Much has been written about another theme — “Trump stocks” that benefit from the president’s policies.
Problem is, repeatedly unsuccessful efforts by Donald Trump and the GOP to replace Obamacare suggest that tax reform, deregulation, infrastructure spending, and other Trump policies could run into trouble as well.
The dust will never settle during a Trump administration and the turmoil isn’t just at home. A glance at the map shows a proliferation of military flash points from the South China Sea to Russia to the Middle East. And when geopolitical tensions worsen, investors flee to the safe haven of gold.
In this fraught environment, the only sure Trump play is gold, the traditional investment refuge during times of crisis.
Gold isn’t just a hedge — it’s also positioned this year for market-thumping gains. When gold prices are on the way up, as they are now, the biggest profits will come from plays that tag along for the ride.
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