Category Investments

Enjoy the fruits of a vegan and value approach to life

05 July 2019 Roberta Barr, Research Analyst, Equity Value at Schroders

There are some striking similarities between the emotional journey of buying a value stock and that of a (clearly purely hypothetical) 18-year-old girl becoming a vegan.

“You do know what a vegan is, don’t you?” sneers a character in the 1980s sitcom Just Good Friends – to which lead character Vince replies: “Absolutely, I never miss an episode of Star Trek.”

Veganism has become a great deal more mainstream over the intervening years, of course – vegan roll, anyone? – and so you may now be wondering why a site as instinctively contrarian as The Value Perspective is addressing the subject.

Two reasons, really – the first being that, as a card-carrying vegan myself, it is apparently my duty to talk about it whenever and wherever possible.

More pertinently for investments, there are some striking similarities between the emotional journey of buying a value stock – and that of a (clearly purely hypothetical) 18-year-old girl becoming a vegan.

First there is excitement
In the case of a value stock that stems from you actually having found one. It may be absolutely hated but it absolutely should not be. Consider the evidence! Revel in the logic!

Clearly this business is worth so much more than everyone else thinks it is – it cannot turn out to be anything other than one of those almost legendary ‘ten-baggers’. Let’s buy massively into the stock and tell everyone about it.

In a similar vein, we have our naïve teenager reading a United Nations report on the benefits of a global shift to a vegan diet. Consider the evidence! Revel in the logic! You are going to be so healthy, such a good person and you will single-handedly save the environment to boot.

How can this not be the future? You are going to buy massively into the idea and you can bet your last falafel you are going to tell everyone about it …

Next comes denial
The value stock stays cheap but you keep believing. The market may hate it but you are sure you have the evidence on your side.

And you keep on about it to your cool growth friends … or you tell all your university friends about veganism even though it is making them uncomfortable and to be honest, as the uncool maths student, your social status could do with snaffling a bonding kebab or two with them …

Oh no – despair
The stock is an embarrassment. It sits at the bottom of your portfolio and you don’t want to talk about it. You keep your veganism quiet too and, while you can’t quite break up with it, you would rather nibble quietly on the vegetable sides than tell anyone.

Your performance is down – socially and professionally – for another year and, if you weren’t so stubborn, you’d buy a bacon sandwich. And Amazon.

But wait, it is 2016 and Ocado has seen a 1,678% increase in vegan sales in the past year. Fresh meat sales are falling. Meat substitutes are hitting the shelves fast in Europe and, in fact, will have increased 451% over the four years to 2018. The market is showing interest in your dud stock too. Profits are finally mean-reverting and the price is nudging up. The occasional sell side report might even be listing it as a ‘buy’ …

And we’re back to elation
McDonalds has unveiled its vegan breaded red pesto goujon wrap, the media is attributing the Greggs profit upgrade to the launch of its vegan roll, 35% of Britons are making a point of having meat-free days … and you are the new guru among your friends, who are falling over themselves to hear your expertise about the stock they seem to remember you mentioning you held a few years back.

Your star stock is the ‘ten bagger’ you almost always believed it would be and you even find yourself writing an investment blog, tying in your vegan diet and preaching how, if only everyone was like you, they could be healthier and happier and greenhouse gas emissions would be down two-thirds.

You might almost be the cool person you claim to hate – which means it could be time to stock up on European banks and give up alcohol.

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