The gruesome killing of George Floyd has sparked a widespread and escalating social unrest in the US – that is currently spreading around the globe – as individuals express their grievances over an unjust system.
When events like this occur, investors tend to look for past events for guidance – and there seems to be a few to choose from. Painful periods with consequential civil unrests and impassioned rallies are no strangers to the US.
The Martin Luther King Assassination Riots in 1968, the infamous L.A. riots in 1992, and perhaps the less distant unrest that followed the fatal shooting of Michael Brown in 2014 are all evocative of the nationwide peaceful demonstrations and fierce riots alike.
All 50 states are currently voicing their frustration and protesting for justice in what is being described as the worst civil unrest to erupt the country in decades.
Although the consensus presents a worrying image, the protests are not impacting the stock market – which remains fixated on the economy’s reopening. However, certain companies are experiencing an extraordinary increase in their stock price due to the widespread protests.
Both Digital Alley (NASDAQ: $DGLY) and Wrap Technologies (NASDAQ: $WRTC) have seen an unprecedented price increases in the last few days, as they manufacture and distribute police body cameras and restraining equipment, respectively.
Interestingly, only 4% of Digital Alley shares and only 8% of Wrap Technologies shares are held by institutions – indicating individual investors are attempting to capitalise on the current social unrest by buying shares that are prone to react during protests and riots.
As a comparison, institutional investors hold 41% of global market capitalisation.
Stocks that are highly prone to fluctuations in times like these are seeing highly speculative actions.
Although both of these stocks possess significant risk, they both manifest an exploitable opportunity for investors – as events like these can have a big impact on stock prices for certain companies amid riots and social unrest.
The company has seen a price increase of 33% since the protests erupted and are experiencing significant volume, subsequently pushing their total value well over US$5.5 billion.
The majority of the shareholders are institutions, with corporations such as BlackRock and Vanguard being one of the major shareholders. Additionally, Axon Enterprises is also a popular stock to short – with 8% of its outstanding shares sold short.
Additionally, shares of firearm manufacturers have soared this week:
Both major firearm manufacturers saw their share price move in unison as a surge in purchases took place. The civil unrest and the heightened likelihood of regulations as the election prospect for Democratic nominee Joe Biden strengthen were identified as key factors.
Interestingly, it is not only in periods of nationwide riots one can profit from the glooming climate. History tells us that firearm purchases increase after mass-shootings, and investors follow suit.
Fear-based buying of future regulation is a major driver of firearm manufacturers profit.
This opens up for a discussion regarding socially responsible investing, and whether or not investors have an obligation to invest in ethical stocks, or avoid exploiting stocks that see an increase in sales performance based on someone else’s misfortune.
Perhaps that is what we can derive from the global pandemic and the evolving nationwide unrest; should stakeholder capitalism evolve to act in the best interest of communities, individuals and society as a whole – in addition to their shareholders?
“Companies and investors are beginning to recognize that what happens out there in the real world is arguebly even more important than what happens on their spreadsheet and terminals” – Kevin Thomas.
However, one thing is clear:
As stocks like these being highly volatile in times of social unrest, investors will always exploit monetary opportunities when they arise – and this time is no different.