Shares of companies whose CEOs dine with Obama outdo the S&P
Money managers tout their investing strategy in books, at seminars, and on blogs. Some call it a science, others an art form. And then, of course, there's luck. In that spirit, here's one more stockpicking technique to add to the list: Take a look at who is lunching at the White House.
Since becoming President, Barack Obama has held seven lunches with small groups of chairmen and chief executive officers, including Jeff Bezos of Amazon.com (AMZN), Ken Chenault of American Express (AXP), Ursula Burns of Xerox (XRX), and Howard Schultz of Starbucks (SBUX). In four of the lunches, the guests' companies, as a group, outperformed the Standard & Poor's 500-stock index 30 trading days after the repast. In two cases, the groups' shares underperformed the S&P 500 a month after lunch with the Commander-in-Chief. Altogether, the six lunch groups outdid the S&P by more than two percentage points. Thirty days haven't elapsed since a seventh lunch held on July 1.
Just a coincidence? Only partly, says Barry Ritholtz, CEO of equity research firm Fusion IQ. Losers don't get asked to hang out with the President, he says. The White House likely is putting together invitation lists so that the President is dining with executives at the top of their games and not associating with companies in decline or under investigation. "If the captain of your team gets a phone call from the White House, it probably means your team is about to win the World Series or already has won," Ritholtz says. Adds Andrew Rudd, CEO of Advisor Software: "Obama is trying to associate himself with winners and it's sort of potentially reinforcing."
Of course, not every one of the 33 publicly traded companies' share prices rose. Eastman Kodak fell 8.4 percent in the 30 trading days after Chief Executive Antonio Perez dined with Obama on Oct. 8, 2009. (The company reported its fourth-straight quarterly loss later that month.) On the plus side, Amazon shares rose 40 percent after Bezos attended the Oct. 8 lunch.
Rudd, whose Lafayette (Calif.) company provides analytical tools to wealth managers, cautions against building an investment strategy around the President's guest lists. The sample size is too small, Rudd says, and the shares' outperformance is probably a statistical anomaly. Still, he says: "I'm sure people will bet on this, just as certain people pick companies with stock prices at 9.99 or the same names as their aunts."
The President's stockpicking magic is still working. On July 1 he lunched on a patio outside the Oval Office with the heads of Walt Disney (DIS), Ford Motor (F), Comcast (CMCSA), and Archer Daniels Midland (ADM). Thirteen trading days later, as of July 20, their companies' shares had risen an average of 9.3 percent vs. 4.8 percent for the S&P.
The bottom line: President Obama's choice of corporate executive lunch guests shows he's pretty good at picking winners.