Let's Go, Bro: The College Kid Portfolio

Includes: ATVI, MNST, UAA
by: Skyler Greene

Investors generally tend to be the type of people who largely ignore pop culture. As I've mentioned before, I get annoyed when Facebook (NASDAQ:FB) serves me Justin Bieber ads, and the tabloids in the grocery store checkouts make me shake my head.

However irrelevant I may find the latest antics of Miley Cyrus (or whoever it is that kids like these days), it recently occurred to me that there's a reason advertisers target high school and college kids. Few people under the age of 25 have much understanding of the concept of "saving," and many still have parental support. Thus, a lot of their income is disposable income, and they're more likely to buoy sales for "trendy" product lines than are 30 and 40somethings. So it seems to me that by following trends on what brands are popular with the kids, investors might be able to make some disposable income of their own.

For a quick backtest of this theory, I chose to analyze the performance of stocks relating to one of the most prevalent cultural trends. In recent times, "bro culture" has gripped America. (See this Time article for a historical perspective.) There have always been those frat boys who love nothing more than booze and a very similar sounding girl-part-word I won't mention, but in recent times, bro culture has become so nefarious and omnipresent that it even got its own parody on South Park. College bros seem to think life's a constant party, an attitude epitomized in The Hangover.

Flaws in that attitude aside, I decided to analyze the performance of three companies (each in different industries) that cater strongly to the bro culture. I tried to pick companies that primarily target the college kid demographic, rather than companies like Apple (NASDAQ:AAPL) that have strong followings in both the college age group and the general public.

The results may surprise you.

Food/Drink: Monster Beverage Corporation (MNST)

A quick Google search (I'll spare you the horror) displays the strong connection between Monster energy drinks and the bro culture. Unsurprisingly, Monster has taken off along with the bro culture. So far, we're batting 1/1 on the "good investment" scorecard.

charts. source: FreeStockCharts.com)

Stock Price Today: $74.79

Stock Price Five Years Ago: $19.34

Return: 286.71%

Annualized Return: 31.04%

Entertainment: Activision Blizzard (ATVI)

Activision's best known offering in recent years is Call of Duty, a game that's as bro as any out there. Call of Duty is one of the most popular video games with teenagers. Due to uncertainties about one of their other popular games (World of Warcraft), the market hasn't treated Activision quite so kindly over the past few years. Still, it hasn't been an awful investment.

Stock Price Today: $11.60

Stock Price Five Years Ago: $8.86

Return: 30.93%

Annualized Return: 5.53%

Clothing: Under Armour Inc (UA)

Under Armour is unabashedly bro -- they even create ad campaigns highlighting that fact. While Under Armour focuses on sportswear, they also offer everyday clothing.

Stock Price Today: $102.74

Stock Price Five Years Ago: $44.40

Return: 131.40%

Annualized Return: 18.26%

Backtest Results

Assuming $10,000 was invested in each of these three stocks five years ago (total investment: $30,000), this three-stock portfolio would now be worth $74,903. That's a 149% five-year return, which handily beats the -12.33% return returned by the S&P 500 over the same trailing five year period.

Conclusion: Maybe We Should Pay Attention To The Kids

My analysis was obviously quite brief, and there could be any number of possible flaws in my methodology -- perhaps I just got lucky and managed to cherry-pick some great performing stocks. Obviously, when investing in any company, it's important to conduct due diligence and analyze the balance sheet, financial metrics, news, etc. However, the dominance of these stocks suggests that it might not be a bad idea to ask your kids or your friends' kids about what's popular with their age group. After all, college kids are often the trend setters, which is why they're targeted with so much marketing.

At the very least, paying attention to what the kids are into might provide a starting point for potentially market-crushing investments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.