Corporate America is railing against striking workers, claiming unions are demanding too much. Give in, and companies will be less profitable and at a competitive disadvantage, big business has said.
So you'd think companies that faced union action would be put in a difficult financial position — and investors, in turn, would sell their stocks.
But that isn't happening.
What's happening: It's been a big year for labor action. About 450,000 US workers, from actors to autoworkers, have participated in over 312 strikes, according to Cornell University's Labor Action Tracker.
A plurality of shareholders – about 30% — surveyed by Public, an investing and research platform for retail traders, said strike action was a potential buying opportunity for fundamentally strong companies.
Public also found that investor interest has risen in three of the most prominent strike-affected companies: Ford, GM, and Stellantis.
Streaming and entertainment companies (Disney, Amazon, Apple, Netflix, Comcast, Paramount and CNN parent company, Warner Bros. Discovery) saw 2.5% growth in new investors on Public during the writers strike, which began in May and ended in early October. The average order value per investor also increased by 14.4% during that period.
The S&P 500 auto industry sector is up about 86% year-to-date and the S&P 500 media & entertainment sector is up 57% over the same period.
Why invest in companies affected by strikes: The auto industry and Hollywood, in particular, are coming off a miserable 2022. To be fair, most industries had a bad 2022, when the market lost a fifth of its value.
But cars and streaming had been riding highs during the pandemic, when people wanted their own, private modes of transportation and entertainment. Then, last year, they came crashing back to Earth when people largely resumed their normal lives.
So 2023 has been something of a rebound for those industries. Still, investors continue to worry about their long-term health.
The entertainment industry is paying a lot of money for shows and movies, and it's unclear how much people really want to watch — and whether the business model will continue to sustain all those shows. Taking a pause in production may have been a necessary correction.
The auto industry was also flush with inventory. Thinning out some of the cars sitting on dealers' lots may not have been the worst thing.
And it's not like union members were asking for the moon. Some of their demands were probably never going to happen — a four-day workweek for automakers, for example, has been a nonstarter for companies. But the companies and the unions haven't been too far apart on pay increases, which both industries can afford (the automakers are scoring record profits this year).
Nothing to sweat for buy-and-hold investors: Even investors who buy index funds and are concerned about the effects of the strike probably can take a deep breath.
Broad index investors have little to worry about. Entertainment and media companies account for just a small part of the market, little more than 2% of the S&P 500, note analysts at Morningstar. Together, Ford and General Motors make up less than 0.25% of the S&P 500.
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