“People want to spoil themselves and treat themselves to something that is enjoyable,” Andrea Ruggeri, CEO of Infusive Asset Management, told CNN Business.
That playbook is working.
Created before the pandemic
The ETF launched last December — months before the pandemic that reshaped the world. It was based on a strategy known as consumer alpha that emphasizes six key trends: indulgence, entertainment, beauty, health, efficiency and status
“We created the strategy totally oblivious and without even thinking about COVID-19. It didn’t even exist,” said Ruggeri. “It’s amazing how it played so well into the pandemic and lockdown. The strategy is emerging even stronger now than it was in 2019.”
Infusive’s goal is to find the companies that matter the most to consumers.
“The health crisis has validated our strategy,” said Matthew Schopfer, Infusive’s head of research. “Our consumer companies are doing great because at the end of the day, they cater to innate human desires, whether it’s simply convenience or indulgence.”
To measure the success of consumer stocks, Infusive looks for companies with stable revenue streams that reflect repeat purchases. Using Big Data, the hedge fund also detects brands that have enough pricing power to charge more than their rivals.
“We’re just trying to find companies that are providing joy to consumers,” said Schopfer.
Betting on e-commerce
“This isn’t a FAANG portfolio,” said Schopfer. “It’s hard to argue these companies shouldn’t be part of the portfolio given how dependent the global person is on many of them.”
Schopfer added that the rise of online shopping isn’t a trend that will go away after the pandemic.
“These are permanent changes. They won’t snap back if a vaccine were suddenly to appear,” he said.
What if the economy doesn’t bounce back?
Of course, one risk posed by betting on consumers is the risk of a weak economic recovery — or worse.
At 10.2%, US unemployment remains above even the worst levels of the Great Recession.
But Infusive is betting that the powerful interventions by the Federal Reserve and Congress will successfully lower unemployment. And that Americans are going to stick with the products and services they love, even in tough times.
“Consumers get so much joy from Netflix and Amazon Prime,” said Schopfer. “These are the last things to be removed from daily spending habits.