What Does a Clever Stock Symbol Get You?

Friday before Labor Day. The markets are open, but investors' minds are already on the long weekend. Another summer came and went. It happens every year, yet we still cannot quite understand how it happened and where the time went. In a couple weeks the evenings will be getting noticeably shorter, the air a bit cooler and we'll be thinking about football, of the American sort. Labor Day weekend is our moment to grab that last hurrah of summer and one last time pack in all those activities we enjoyed the past few months. Who among us can get too excited about developments in the stock market when the Boys of Summer will soon be gone? In honor of a lazy Friday that will effectively end by lunchtime, why not lighten the mental load and have a little fun? We can return to the tough stuff on Tuesday morning. My own mind started drifting to more entertaining subjects last night when I checked on the Asian opens and noticed that Australia's Woolworths, also known as Woolies, reported earnings. The earnings were not important, but one could not help but fall in love with their symbol WOW. Wow, indeed. What a great symbol. That got me to thinking, always a dangerous activity on a Thursday night. Do vanity symbols matter to stock performance? Obviously they shouldn't, but perhaps they might just play a signaling function that can offer a bit of insight into the personality of management, for example. Splits should not matter either, but research shows that splits can be a subtle indicator of management confidence in the outlook for the company. In this case, perhaps vanity symbols indicate that a management team is promotional or perhaps more focused on being clever than delivering the numbers. A quick study seemed like a good way to kill an hour on a quiet Thursday evening. And the answer is ... How was that for a big reveal? Almost as good as Al Capone's vault! Seriously, this is not a serious scientific study, so of course we can't draw any firm conclusions. The actual performance depends far more on the group, market cap, exchange and many other variables. Furthermore, we need to define what clever even means in a symbol. This is a very limited universe thought up by me in my free time. Having said that, it is still fun to review the data. The clever symbols fell into two groups: ETFs and stocks. ETFs try to be clever for marketing purposes and the actual performance would almost assuredly not be influenced by the personalities of the marketing department at the sponsoring firm. Oddly though, the average performance has been horrible, and on a five-year basis none of these ETFs beat the S&P 500. Hmm. Conversely, in stocks the performance has been great, at least on a five-year basis if not this year. But the range is huge, with too many outliers to draw a firm conclusion. Owning a clever symbol could have resulted in a quadruple (the much-hated Spirit Airlines (SAVE)) or a complete wipeout. Some of the clever symbols are famous household names. Everyone knows Harley-Davidson (HOG), Brinker (EAT) and Southwest (LUV) (named after its base at Love Field in Dallas). Franklin Templeton (BEN) and Transocean (RIG) are also well known to stock market denizens. Others are too clever by half, considering the money lost by shareholders over the last five years. Deal a Day (DEEL) was a bad deal and certainly no GroupOn (GRPN), and China Gerui (CHOP) (named after the ubiquitous Chinese stamp known as a chop) managed to chop your net worth by 97%. Shareholders got stung in Scorpio Tankers (STNG) and are not growing their assets in Origin Agritech (SEED). Although a money-loser, I do have to give a kudo to First Majestic Silver (AG) for using silver's symbol on the periodic table. Clever!

What Does a Clever Stock Symbol Get You?

Let's look at the relationship between symbols and performance.

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