Avoiding ‘Anger’ Stocks Was One Way to Beat the Market in 2019

(Bloomberg) -- If you wanted to outperform the market in 2019, one way was to avoid investing in companies that courted controversy.

The data provider Indexica ranked companies on what it calls an anger metric. That means companies that, based on media and analyst reports, provoke a lot of outrage, frustration, annoyance and hatred.

The finding: A portfolio comprised of S&P 500 Index stocks with the highest anger scores underperformed those with the least anger associated with them by 8 percentage points through Nov. 8, 2019, according to Indexica.

Stocks that were in the high anger basket at some point in 2019 included fossil fuel energy companies such as Atmos Energy Corp. and ConocoPhillips that were derided for ties to climate change. Those two companies lagged the S&P 500 Index by 9 percentage points and 25 percentage points, respectively, in 2019 through Dec. 30. Of course, the energy sector was an underperformer this year.

Consolidated Edison Inc., the power utility for New York City, also made an appearance in the high anger bucket after faulty wiring plunged much of Manhattan’s west side into darkness in July. It returned 9 percentage points less than the benchmark index this year.

These returns may not sound surprising -- after all, who wants to buy a controversial stock -- but it hasn’t historically been the case, according to Indexica.

Over a three-year period through 2018, the returns of anger stocks were roughly in line with the S&P 500 Index, the firm said.

“When anger did exist towards a company in 2019, the impact was extreme compared to prior years,” said Zak Selbert, chief executive officer at Indexica.

To contact the reporter on this story: Brandon Kochkodin in New York at bkochkodin@bloomberg.net

To contact the editors responsible for this story: Joe Weisenthal at jweisenthal@bloomberg.net, Larry Reibstein

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