How to Invest in the Election

Written by Jimmy Mengel
Posted November 2, 2018 at 8:00PM

"I'm against very wealthy people influencing elections, but as long as it's doable I'm going to do it."
— Sheldon Adelson

Ain't that the truth...

Casino magnate Sheldon Adelson just dumped $30 million into Republican candidates for next week's elections. He also unloaded $82 million in the 2016 presidential elections. He's not doing it for fun or charity; he obviously thinks he'll get a sweet return on that investment. 

But it doesn't matter who wins or loses, money gets paid on each side to ensure that the access is there. Without campaign contributions, phone calls don't get answered. Meetings aren't booked. Subsidies and contracts are given to the folks who fund the whole dog-and-pony show...

As Will Rogers once quipped, “Politics has become so expensive that it takes a lot of money even to be defeated.”

That isn't wasted money, it's an investment. As long as we have the campaign laws we do, you would be a fool to ignore the flow of money from companies and sectors that are buying influence and expect to see a return on that investment.

That brings us to part two of the interview I brought you yesterday with Hal Lambert, the head of Point Bridge Capital and the founder of the Point Bridge GOP Stock Tracker (BATS: MAGA). It tracks an index of U.S. large-cap companies whose employees and political action committees are highly supportive of Republican candidates.

Here's his view of how money is being spent during the election, and what that means for investors...

Jimmy Mengel: I've found that, over the years of investing in my career following money and politics, it seems to be you want to be as agnostic as possible as a clear-minded investor.

However, I have read that ETFs that really appeal to certain people and appeal to certain groups, the amount of money flowing into them, has tripled in the last 10 years. So people really are voting with their wallets and their investments.

I imagine you think that will continue?

Hal Lambert: That's one of the main reasons I launched the ETF is people are out there boycotting particular companies, right? So people were upset with Nike (NYSE: NKE), so they said they weren't going to buy Nike shoes. Or they're upset with Target (NYSE: TGT), they're not going to shop at Target. Or they're upset with Starbucks (NASDAQ: SBUX). So, they don't buy Starbucks.

If that's the case, why would you own Target or Nike in your investment portfolio? If you're going to boycott the product, shouldn't you also not own the stock? If your boycott works, the stock goes down. You certainly don't want to own it. A lot of people don't know they own it because they have it in their mutual funds. They're out boycotting a company and they don't realize they own that company in their mutual fund that they own.

I was looking at how do you find a way for people to invest the same way that they view the world politically. This was one of the ways to do that. I think there will be more and more of this because it only makes sense. If you're not political, if someone doesn't care, then this is not for them. This is not the right fund for them.

But for people that are, and there are a lot of people out there that are that way, then they should take a look.

Jimmy Mengel: I think that's interesting. I remember having a pretty heated debate many years ago with a colleague. I had invested in Pfizer at the time, and they were just ripping me to shreds. "How can you invest in Big Pharma? All they do is try to kill people and keep people sick."

And I asked them "Do you have a 401k plan or any mutual funds?" And they said, "Well, yeah."

And I said, "It's in there. You're already investing in it." Their mind was blown and I totally respected that, I was just saying, "Hey, listen. Everyone has their different views. Everyone can think how they wish. But if you feel that way, you better take a look at your investments before you start saying that kind of thing because a lot of these companies that you may disagree with are certainly in these larger funds."

Hal Lambert: Absolutely. You're exactly right. People don't realize that they're out there going, "Oh, I can't believe you would buy this or you would do that." And you're like, "Have you looked at your mutual funds?"

Jimmy Mengel: I'm sure if most people do, they will definitely disagree with a lot of the stuff in there which I think is the cool thing about the ETFs is that you can actually vote with your conscience and also make some money along the way. I may not agree with it personally, but I can see why others would. That's what's already great about America.

Hal Lambert: You've looked at these companies, these are great companies. These are great stocks in here. Some of the surprising stocks are like Berkshire Hathaway. People think of Warren Buffet as a big liberal and Democrat.

But yet, it's in here because the political contributions that come from the company of Burlington Northern Santa Fe (NYSE: BNI), which is huge towards Republicans and not towards Democrats. You can have somebody at the top that maybe is espousing certain things but it's more like "follow the money."

What are they doing with their money?

Jimmy Mengel: I think follow the money is the way to look at most things. That's why I think this is such a fascinating ETF because you look at the filings and you can see: this money is going to this party, this money is going to that party.

Hal Lambert: Right.

Jimmy Mengel: I would say regardless of party. If you're looking at either party, still watch the money flowing into Washington and you know that this money is not just being burned. That money is going for very specific reasons and the more money they're putting in, the more favors they're going to get out.

Hal Lambert: Well, that's certainly what people believe, isn't it? I mean, that's the other thing, obviously, if your view is that "hey these companies are contributing therefore legislation and that kind of thing is going to be favorable over the long term" then that should be favorable to stocks as well.

Right?

Jimmy Mengel: Yeah. Absolutely. One of my favorite stocks for the past 10 years has been Sherwin-Williams (NYSE: SHW). I noticed that stock in your ETF. This is not necessarily a political stock, but when you're talking about good housing numbers and you're talking about a thriving economy where you need paint.

Something as basic as that.

They may be giving money to a campaign or carving out their little niche with Washington. But in the end, a lot of these are just straight up great companies...

Hal Lambert: Right.

Jimmy Mengel: They're just buying a seat at the table and doing what they have to do.

Hal Lambert: One of the interesting things that I noticed was that one of the companies that's in this is Goldman Sachs. But many of the investment banks and banks prior to 2008 gave heavily to Democrats. 

They really reversed and a lot of them started giving much more to Republicans. Now you're seeing, the Republicans are reducing regulations and so clearly there's an aspect to the giving.

Right?

And a lot of those banks are benefiting from the reduced regulation and I think the economy as a whole is. I think the country is. So, my belief is that companies that are run more conservatively and more appropriately will do better in the long run.

Jimmy Mengel: It's definitely an interesting theory and judging by how the ETF has held up, it seems to be a slow and steady thing. But you wouldn't expect wild swings either. That's part of the appeal with any ETF.

Hal Lambert: Depending on the ETF, the more diversified the portfolio inside the ETF, typically the less that it moves up or down. But again, it depends on the asset. People just need to look at their own risk in their own portfolios and decide what their risk tolerance is and they're going to have to decide whether it makes sense for them from a risk standpoint. But this is certainly equities, it's stocks, and so you're going to have stock-type risk in it.

So they're going to have to decide whether that's appropriate for them.

Jimmy Mengel: As a political agnostic, I find it interesting that people wouldn't spread their money out a little bit just in case, at the very least. Because companies generally don't operate on their morals. Right?

Hal Lambert: Well, some of the companies do. Some of the companies spread their money out, but there's a huge percentage that don't and there are those that skew heavily Republican and those that skew heavily Democrat.

Jimmy Mengel: You're betting in the long term the Republicans are going to do a lot better at businesses? It's been rather mixed historically.

Hal Lambert: That's what I think and I also think that that's a better look at what's going on in the economy right now. None of this would be happening, I don't think, if Hillary Clinton had won the Presidency.

Jimmy Mengel: Is there an analog to what your ETF offers?

Hal Lambert: Interesting question. There's not. There's no other political ETFs out there. Purely political. There's the EST stuff, like I said, but that's so specialized that there's not really a way to compare anything to it. But yeah, there is not another investment strategy like this out there.

It was the first ever, so it's nice to be the first at something and it's been around for a long, long time..

Jimmy Mengel: Okay. So what's the plan on this going forward and what's the plan if Donald Trump does not get re-elected? Can you change the ETF name? 

Hal Lambert: Well, the only thing that could potentially be changed — I could change the ticker from MAGA. I could do that. I mean, once you have a pretty name, it may or may not make sense to do that. 

So I can change the ticker and I've reserved, by the way, KAG which is Keep America Great, which is probably going to be his slogan going into 2020's election.

Jimmy Mengel: Good one. Thanks for the time, Hal.

Hal Lambert: Thanks Jimmy, I enjoyed it.

For more info on Point Bridge GOP Stock Tracker (BATS: MAGA), you can find it here.

Have a great weekend, and get out and vote!

Godspeed,
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Jimmy Mengel

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Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.

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