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Assessing the 2016 LATINA Style 50 Report

Investing in the Advancement of Hispanic Women

By Paul Roldan, Senior Partner
Allgen Financial Advisors, Inc.

Uncertainty has been prevalent in the world this past year with happenings such as Brexit, shootings, U.S. Presidential elections, etc. Yet, in the midst of uncertain times LATINA Style magazine challenges the world claiming that investing in Latinas makes sense from all perspectives. Since 2001, LATINA Style has recognized companies committed to diversity and inclusion in their respective workforce, especially those that provide career advancement opportunities for Hispanic women. Each year, LATINA Style chooses 50 companies (LS50) via an extensive survey as being the most sensitive to Latinas’ needs and goals in the workplace and that provide the best career opportunities for Latinas in the U.S. After several years of honoring such companies, LATINA Style posed an interesting question: is it economically prudent to invest in companies that are committed to the advancement of Latinas in the workplace? While many have made the case that women in business makes sense on all levels, LATINA Style took this a step further by asking if this was true even as a financial investment.

Using moral or values based criteria to invest has been attempted via “socially responsible funds” (investment funds that use certain value or moral principles by which to invest, such as not investing in casinos or tobacco companies). This type of investing, however, has been critiqued as underperforming the stock market at large due to limited availability of investment options for investors. While potentially satisfying an investor’s quest to promote or fulfill a moral or philosophical value, investments are ultimately judged by performance or total return.

LATINA Style put this theory to the test using its own socially responsible criteria: investing in the LS50. Allgen Financial Services, Inc. (www.allgenfinancial.com) a registered investment advisory firm based in Florida, was commissioned to test and compare the returns of companies in the LS50 to the stock market at large. Using the S&P 500 index to represent the market at large, Allgen Financial Services, Inc. compiled yearly returns of the S&P 500 vs. yearly returns equally allocated among the LS50 for the respective years. While previous years’ studies have shown that investing in these companies can be a wise investment purely from a financial perspective,* the 2016 results showed deviation from the historical trend.

The S&P 500 eked out a mere 1.38% gain in 2016. Comparatively, an investment in the LS50 would have been down -2.33%. However, when aggregated with hypothetical performance of the index and real returns of the S&P 500 since 2001, the chart below shows the LS50 outperforming the S&P 500 over that time period. The yearly average for the LS50 was 8% better than that of the S&P500 from 2001 through 2015.

Average Annual Real Return since 2001*
LS 50 Index 15.70%
S&P 500 7.71%

In real dollars, a $100,000 hypothetical investment in the LS50 in the beginning of 2001 would have resulted in an account balance of $319,854 while an equivalent investment in the S&P500 would have resulted in an account balance of $207,924 at the end of 2015 (see chart). That represents a 54% positive cumulative difference ($111,931 more) for an investor choosing to invest in the LS50 index versus the S&P500. In other words, an investment in the LS50 would have resulted in greater positive gains versus the same investment in the S&P 500 even amidst these challenging economic/political/social circumstances. This performance takes into account that there were years in the study where the LS50 underperformed the S&P 500. Yet, even with these underperforming years, longer term returns have consistently shown the LS50 outperforming the S&P500 index.

LS50 Chart Assessment chart 2016

While the analysis is by no means comprehensive in that there are multiple other variables to consider when making investment decisions, it does provide an interesting consideration in a time when society questions every aspect of daily living. As such, these results have affirmed that investing in companies that live out responsible, social practices, as do the LS50, can be morally beneficial while financially prudent.

Disclaimer
*This analysis is based on available data at the time of analysis. Some company performances have been omitted as they no longer exist or were not publicly traded. This analysis and returns are also based on a yearly rebalancing of the portfolio to take into account the different companies that are chosen as part of the index each year and an equal weighting of each company. In addition, the measured performance and conclusions derived therein reflect a retrospective look at market performance as the study is conducted after the companies have been selected. It is never prudent to invest based on historical stock performance alone. In addition, the LS50 index is not a real market index but rather a dynamic collection of companies as chosen yearly by LATINA Style magazine. The rates of return and performance illustrated do not reflect any costs associated with investing in either index.

As such, the above article should not be construed, nor is it written to provide financial advice as individual situations may vary and past performance is not indicative of future results. Any decision to invest in equity markets should be consulted with a financial professional.