To The Moon

Anheuser-Busch stock $BUD collapsed recently.

This was partly due to backlash. One of the firm’s brands, Bud Light, partnered with a transgendered influencer. Buyers of Bud Light decided to boycott the beer due to its involvement with a trans person.

The boycott dethroned Bud Light as the top selling beer in the United States. Consumers easily replaced it with substitutes, and the stock reacted negatively to depressed sales.

This is where I come in. I was thinking about looking into picking up some $BUD stock at a discount. Boycotts typically don’t last forever, and Anheuser-Busch is an empire with a wide range of products that aren’t seeing depressed sales. At first glance, I thought that it could be a market overreaction.

Then I realized that if anti-woke sentiment will continue to have a material effect on stocks, I need to think about it in the context of my portfolio.

We consider a wide array of risks, and how to diversify or limit exposure to them, when investing. Few investors would want to be overly exposed to firms susceptible to hurricanes or US-China tensions. Perhaps it is appropriate to manage culture risk (coined after the “culture wars”) in a portfolio as well.

For example, Target, Disney, and Chick-fil-A (Chick-fil-A??) are targets of anti-woke consumers. Their products and brands have been relentlessly attacked by people protesting diversity.

If you are long on some of these names already, then taking advantage of drops like $BUD could add to your portfolio’s culture risk.

If you own say 15 stocks, then just 2 of them being associated with woke backlash puts more than 13% of your portfolio at risk.

The threat of culture risk so far seems uncertain. By its nature, I would bet on it being relatively transient. The uncertainty of it, however, means that investors should stay diligent.

Lets say an anti-woke movement picks up steam and begins to seriously impact the bottom line of numerous firms. The impact of culture risk would be unmeasured by fundamentals. Firms with promising earnings and a healthy balance sheet can still suffer from brand management, which this falls under.

Personally, I have exposure to “woke” stocks in my portfolio right now. I’m feeling the pain, regularly seeing headlines of consumers lashing out, so I’m going to hold off on picking up anymore culture risk for the time being.