Why a funny stock ticker can mean better returns
First Sentier Investors (FSI) is the latest to join the clever ticker club.
The global investment manager listed its new offering on the ASX: the First Sentier Geared Australian Share Fund Complex ETF on May 15.
Fortunately, the company could rely on a clever ticker, a short code that will catch the eyes, hearts and wallets of every retail investor.
In selecting its ticker, Quin Smith, FSI's head of distribution Australia and New Zealand, says the company's internal teams discussed a range of options that would:
- Align with its product offering,
- Be easily identifiable in the market, and
- Not already used by other providers.
One option off the table was GEAR, a clever ticker used by Betashares for its geared ETF in 2014.
Instead, First Sentier selected LEVR, a nod to the fund's leveraged investment approach.
"In LEVR, we wanted to create a ticker that was meaningful to our offering," says Smith. "It's a nod to the 'leverage' or 'gearing' associated with the fund's investment strategy."
The psychology of stock tickers
In the high-stakes world of investing, a stock ticker might seem trivial. But research suggests these short codes can pack a big punch, influencing performance.
It's all about psychology. When you scroll through the ASX, certain tickers such as WOW, TOY, and ZIP jump out, even if you don't immediately connect them to Woolworths, Toys 'R' Us, and ZIP Pay.
Some tickers become so iconic that they overshadow the company's full name - think IBM, BP, ANZ, and NAB (10 points if you know the full names).
Just reading this article, you've likely felt the effect, instantly recognising ASX as the Australian Stock Exchange.
The origin of tickers
Originally, ticker symbols were shorthand for companies, stamped out on ticker tape machines. Today, they're also codes for securities such as exchange traded funds (ETFs). They are typically a few letters long, making them quick for investors to identify and trade. But they can be much more than that.
Research backs it up. A 2009 study found stocks with clever ticker symbols outperformed the market from 1984 to 2005.
This followed a 2006 Princeton survey, which found, all else being equal, that a stock with the symbol BAL should outperform one with the symbol BDL in the first few days of trading.
Pomona College's 2019 research investigated the reasons why this was happening. It found that tickers with actual English words were easier to understand and trade, attracting more retail investors.
Companies began taking note, adjusting their ticker code to reflect its name. Others tweaked their tickers to fit the brand vision.
When Facebook rebranded as Meta Platforms Inc, it swapped its ticker from FB to META, making its metaverse ambitions crystal clear.
US President Donald Trump's media venture, Trump Media & Technology Group, is another example, launching with the ticker DJT - his initials - instead of the bland TMTG.
And that's not even mentioning the immediate recognition of Trump's cryptocurrency, aptly called TRUMP, or the cultural influence of DOGE, the ticker for Dogecoin, which has since become an unrelated acronym for a government department.
$500k for a ticker?
These little codes can be worth big money, particularly in spaces motivated by themes or hype.
In an interview with US news publication Marketplace, Bloomberg journalist Katie Ryssdal talked about when she tried to buy one of the most sought-after ticker symbols - MEME, a reference to the volatile "meme stocks".
"So I found out who was holding it. It was Roundhill Investments. And in talking with them, I found out that actually, unrelated to MEME, someone had tried to buy one of their live tickers off of them for 250 grand, unsolicited. So, I had to try to buy MEME. Why not? And I wasn't successful, obviously."
While Ryssdal's $500,000 offer for the ticker was knocked back, Roundhill Investments did launch its ETF under the ticker MEME, which tracks the performance of meme stocks. Currently it's up 146%.
Why a clever ticker isn't everything
It's important to note that a clever ticker alone doesn't drive stock performance.
Having a ticker that clearly relates to the company's name doesn't directly make the company more valuable, according to a University of Texas study of 181 US retail companies between 1994 and 2006.
This is partly because if the code associates with the company when its struggling, it could have a negative effect.
Smith says that while LEVR is a clever reference to its offering, "it was only one part of the overall process."
"Bringing a product to market involves many steps, so it was part of a much larger program of work."
However, the research found that when a company with a relevant ticker also performs well, advertises effectively, and has a strong distribution network, "its ticker does contribute to its overall intangible value and benefits its shareholders".
This suggests that a good ticker symbol can be a valuable marketing asset when combined with other positive company traits, and companies should consider this when choosing their stock ticker.
"A company's stock is thought of largely as a financial problem, but there are marketing considerations as well," said the study's author Raji Srinivasan to the university's paper. "Think of your firm's investors as customers. They are buying your stock."
"It might be something that makes the stock seem more familiar to me," she said. "I feel safer, and I feel more interested in buying it."
15 clever stock ticker symbols
- ASX: AAA - Betashares high interest earning cash ETF (a nod to credit ratings)
- ASX: BEAR - Betashares inverse ETF (goes up when the market goes down)
- NASDAQ: CAKE - The Cheesecake Factory
- NASDAQ: FIZZ - National Beverage Corp
- NASDAQ: SLIM - Obesity ETF
- NASDAQ: VNOM - Viper Energy
- NASDAQ: WOOF - Petco Health and Wellness Co
- NYSE: BID - Sotheby's auction house
- NYSE: HOG - Harley-Davidson
- NYSE: MOO - Market Vectors Agribusiness
- NYSE: MMM - 3M
- NYSE: NUT - Macadamia Orchards
- NASDAQ: PZZA - Papa John's Pizza
- NYSE: RACE - Ferrari NV
- NYSE: ZZ - Sealy
What's your favourite ticker? Comment below.
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