-Note that this a repost of an older article.
Anheuser-Busch and Yum! Brands are up big in comparison to their numbers last year. BUD has seen a 25.87 percent and YUM is up 16.26 percent. According to therapists across America, this growth in comfort food stocks or stocks like beer brand Anheuser-Busch and fast-food company Yum! Brands is a heavy reflection of the anxieties of the average American anticipating the results of the 2016 presidential election.
A study conducted at the Dublin School of Business in early 2016 found that when a person is anxious or worried they tend to consume more food. During an election year, emotions can dictate happiness or misery depending on your political alliance.
Market returns during an election cycle tend to be lower than years immediately preceding and following an election year. That shouldn’t come as a surprise. Humans tend to be guided by our emotions, and the time during an election is when emotions are going to be most tied to election results.
In October 2012 BUD saw a 1.5 percent drop in price from a stock price of $90.27 on October 1 to $88.91 on October 4 the day after the first 2012 debate. YUM! Brands also fell one percent opening at $66.80 October 1 and closing at $66.13 October 4th. Although then president Barak Obama by all reports had a disappointing debate he still led the polls by 3-5% margin.
Fast forward to September 26, 2016, as secretary Hillary Clinton, the first female nominee in history took the debate stage against the shock of the 2016 presidential campaign, Donald Trump. Also taking the stage was fear and uncertainty of how this debate could change America’s future.
While the candidates debated both companies undertook interesting bipartisan campaigns that affected their stock prices over the following days. During the first official debate, Anheuser-Busch set up home at Hofstra University and held the social media driven, “Brew Democracy” campaign.
Pizza Hut, a Yum! Brands company used the “Pizza Party” theme the night of the election and with the “Pick Your side America” interactive.
The effect, by September 28, the stock BUD stock had risen 6.9 percent to $133.44 per share (it’s monthly peak), a 25.87 percent increase from this time last year, where the stock was at $106.01. Yum! Brands declared a 10.9 percent increase from their prior quarterly dividend of $0.46 to rise to $0.51 per on September 26, with a forward yield 2.25 percent and is up 16.26 percent to $90.81 from its September 2015 cost per share of $78.11.
On the other end of the spectrum higher-end harder to afford brands such as liquor brands Diageo PLC DEO and ARKR restaurant group fell on September 26. DEO dropped 1.28 points hitting a low of 115.07 after closing the weekend at 116.35. ARKR who opened the morning at $22.61 a share dropped .32 points the day after the debate to open at $22.29.
Although DEO and ARKR are more luxury brands, it is to be noted that both brands rebounded significantly by September 27 and 28. ARKR hit a high of $22.74 and DEO went up to a $117.07 stock price.
This behavior shows that those with bigger banks are also seeking comforts in their stocks. It also shows, that higher growth and stock value of BUD and YUM! are reflecting more of the average Joes and the average investors who are investing are looking to comfort foods and comfort food stocks because they are more reflective of the financial reality of the country.
Both BUD and YUM! Brands have products financially accessible to those operating at any price point. BUD has its traditional lagers and Bud Light that are under four dollars a bottle or can and all YUM! Brands restaurants have full meals (meals that have an entree, drink, and dessert) at or under five dollars. Theses accessible price points not only make these companies an easy choice for consumers but also investors.
“The second quarter saw another encouraging performance in the U.S., Total revenue in the quarter grew by 4 percent, growing by 6.1 percent on a constant geographic basis, said CEO Carlos Brito during the Q2 2016 Earnings Conference Call July 29, 2016.
Brito then spoke to Bud Light’s image in America’s present social and political climate. “Bud Light was built by not being afraid of tackling cultural, contemporary, relevant topics in a very Bud Light way of doing it. We’re back to that way of doing things,” said Brito.
While Anheuser- Busch is connecting with consumers and investors with price and image YUM! Brands are focused heaving on products and price.
“Taco Bell, operating profit grew 1 percent, our $5 Cravings Deal bundle improved results toward the end of the second quarter and through the first five weeks of the third quarter, same-store sales are positive,” said Greg Creed, Yum Brands CEO during its July Q2 2016 earnings call.
The numbers show that this presidential race has created a favorable climate for comfort food stocks. However, in and election heavily about the average American it has also created a more favorable climate for brands like BUD and YUM! Brands as a whole.
While other sectors struggle with the increasing the uncertainty of this presidential race, Both Anheuser-Busch, Yum! Brands expect to continue to benefit from this uncertainty and continue to growth more into the fourth quarter.
We know from data that emotional investing is a dangerous approach, but it inevitable as long as humans feel emotions and presidential elections.