For anyone who thinks that the “consumer” generation has no say on the market, check this out.  In May 2007, Outlaw Consulting, a consulting firm with a focus on Generation Y’s impact on the consumer marketplace, released the results of their survey on Generation Y’s 15 Most Trusted brands.  The list goes as follows:

1. Apple
2. Trader Joe’s
3. Jet Blue
4. In-N-Out Burger
5. Ben and Jerry’s
6. Whole Foods
7. Adidas
8. American Apparel
9. Target
10. H&M
11. Levi’s
12. Volkswagen
13. Converse
14. Vitamin Water
15. Red Stripe

The first surprising thing that Wall Street types should take notice of from this list is that this list of the 15 Most Trusted Gen Y brands spans a diversified array of investment industries including Personal Computers, Textiles, Apparel, Grocery Stores and Discount Variety Stores.  The second is how global in reach the list is.  While “globalization” may be a term created by the Boomers, the Post-Boomer generations are true testaments to the flatness of the world, and it shows as 5 of the 15 names on the Most Trusted list are international brands or the subsidiary or brand of an international company.  The third item of note from the list, maybe more surprising to the under 30 crowd than the over 30 crowd is how many publicly traded companies were considered “Most Trusted” by Gen Y.  When the private companies from the list are removed the list looks like this (Ticker symbols in [ ]):

1. Apple [AAPL]
2. Jet Blue [JBLU]
3. Ben and Jerry’s (subsidiary of Unilever [UL])
4. Whole Foods [WFMI]
5. Adidas – [ADDYY.PK]
6. American Apparel [EDA]
7. Target – [TGT]
8. H&M – [HMRZF]
9. Volkswagen [VOWG.DE – Traded on the German Exchange]
10. Converse (bought by Nike [NKE] in 2003.  Didjya know that?)
11. Vitamin Water (created by Energy Brands which was bought by Coke [COKE] in 2007.  Yes, 50 Cent did make over $100 million in that deal)
12. Red Stripe (Manufactured by Guiness USA a subsidiary of Diageo [DEO])

12 of the 15 brands listed as Most Trusted by Generation Y are either publicly traded or owned by a company that is.  That means that this generation, using the same marketplace that is available to everybody else could have an ownership stake in 80% of the brands they trust most.  

The most interesting revelation from the Most Trusted list is the performance of the portfolio consisting of Gen Y’s most trusted publicly traded companies.  If you created a portfolio from the list from above, you would have a portfolio (let’s call it the “Gen Y Most Trusted Fund”) that looked like this:

1. Apple [AAPL]
2.  Jet Blue [JBLU]
3. Unilever [UL]
4. Whole Foods [WFMI]
5. Adidas  [ADDYY]
6. American Apparel [EDA]
7. Target [TGT]
8. H&M [HMRZF]
9. Volkswagen [VOW.DE]
10. Nike [NKE]
11. Coke [COKE]
12. Diageo [DEO]

In the year preceding the Outlaw Consulting survey, the Gen Y Most Trusted Fund stocks performed like this:

1. Apple [AAPL]                            +69.12%
2.  Jet Blue [JBLU]                         +10.51%
3. Unilever [UL]                             +44.17%
4. Whole Foods [WFMI]                  -40.80%
5. Adidas  [ADDYY]                       +22.62%
6. American Apparel [EDA]              +55.30%
7. Target [TGT]                              +17.33%
8. H&M [HMRZF]                         +76.82%
9. Volkswagen [VOWG.DE]+102.16%
10. Nike [NKE]                                +33.88%
11. Coke [COKE]                             +14.49%
12. Diageo [DEO]                             +31.9%

AVERAGE:                                  36.46%

S&P 500:                                     19.08%

For the calendar year before the release of the survey, the “Gen Y Most Trusted” fund would have returned an amazing 36.46%, almost double the result for the S&P 500 during that same time period.  This means that the collective brand loyalties of Gen Y, when applied to the stock market were reasonably diversified and almost twice as good as the broad market as a whole.  The point is not that every company or brand that Post-Boomers think is cool makes a good stock.  The point is that there is something inherent in the way the group operates that has an impact on the market that can be used to turn waste into wealth and allow you to expand your knowledge of the brands and companies closest to you to the vast landscape of companies that make up the stock market.  In other words, you can use your knowledge of companies like Apple and Nike as a gateway to helping you learn how to assess companies like GE and Sanofi-Aventis

The results of the backtested Gen Y Most Trusted Fund are simultaneously miraculous and entirely plausible.  The reasoning is quite simple – try to follow.  The stock of companies that make money generally (although not always) go up.  Generations X and Y are the target audience of the vast majority of the companies on the Most Trusted list.  Generations X and Y are also the largest consumer oriented, brand associated groups.  Therefore Generations X and Y have a lot to do with which companies make money and conversely, which stocks have a tendency to do well.