Various studies indicate that publicly traded companies having gender diversity in the C-suite and on the board can lead to better outcomes for investors.
Along those lines, a strong case can be made that not enough major U.S. companies, including plenty of S&P 500 members, are promoting women to the highest “C”-level jobs. However, there are some with strong records on this front, and the SPDR SSGA Gender Diversity Index ETF (SHE) provides investors with an efficient avenue for accessing these firms.
“Of course, buying a stock simply because the company’s CEO is a woman doesn’t make any more investment sense than buying a stock simply because the company’s CEO is a man,” writes Morningstar’s Susan Dziubinski. “Instead, you want to examine fundamentals, consider valuation, and apply whatever other investment metrics matter to you before buying. Moreover, CEOs come and go. That woman-led company may be managed by a man–and vice versa–soon enough.”
As Dziubinski notes, buying a stock simply based on the gender of the company’s highest-ranking executives isn’t a winning fundamental strategy. That said, plenty of SHE components are fundamentally attractive companies. Those include consumer staples giant Clorox (NYSE:CLX).
While Clorox was a star during the early stages of the coronavirus pandemic as folks placed new emphasis on cleanliness, the shares have since come back to earth. Those declines may be obfuscating a strong fundamental outlook.
“Our forecast calls for Clorox to expend a low-double-digit percentage of sales toward research, development, and marketing on an annual basis,” says Erin Lash, Morningstar sector director. “We view this spending as particularly critical against the current backdrop (elevated inflation and intense competition). More specifically, Clorox goes to bat with lower-priced private-label offerings in most of the categories in which it plays, but we think investments in innovation and marketing should help its fare stand out on the shelf and stifle trading down.”
Morningstar’s list of the best women-led companies includes several other SHE components in addition to Clorox. That group also features, in order of weight in the fund, Northrop Grumman (NYSE: NOC), Otis Worldwide (OTIS), Hershey (NYSE:HSY), and Yum China Holdings (NASDAQ:YUMC). Overall, the $243.78 million SHE is home to 191 stocks, according to issuer data.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.