The Power of Tickers: A Lesson in Stock Performance

Raytheon Technologies, a prominent player in the stock market (ticker: RTX), recently underwent a name change. It transformed from Raytheon Technologies into RTX, effective from Monday.

The reasons behind this name change remain uncertain as RTX declined to provide any comment or clarification.

Interestingly, longer names have been outperforming shorter names in the stock market lately. According to data from the S&P 500, the average return for companies with shorter names, falling within the shortest quintile, stands at approximately 15% over the past year. In contrast, companies with longer names have achieved an average return of about 19%. It is worth noting that the average return for all stocks in the S&P 500 also hovers around 19%.

Regrettably, companies with three-letter names or even shorter names have experienced even worse performance than those in the shortest quintile. The average return for companies with two or three-letter names stands at a meager 3%. Among the list of these underperforming companies are 3M (MMM) and AT&T (T), although it is arguable whether the inclusion of an “&” amounts to another letter.

With its name change, RTX now joins the league of three-letter companies. However, its stock has seen a modest return of less than 10% over the past 12 months. Investors are generally optimistic about the aerospace industry’s recovery as travel rebounds from the pandemic-induced lows. However, defense stocks have not exhibited the same level of strength.

For instance, shares of Airbus (AIR.France) have yielded a remarkable return of approximately 30% over the past year. Conversely, Northrop Grumman (NOC) shares have essentially performed at zero growth.

The Power of Tickers: A Lesson in Stock Performance

The length of a stock ticker symbol may seem insignificant, but recent trends reveal otherwise. Over the past year, longer tickers have shown better performance compared to shorter ones.

Short and Sweet: One-Letter Tickers

Stocks with one-letter tickers have fared poorly, with an average return of just 2% over the past 12 months. Examples include AT&T, Macy’s (M), and United States Steel (X). These companies, often established and traditional in nature, have struggled to capture the market’s enthusiasm for new technologies.

The Sweet Spot: Four or Five-Letter Tickers

On the other hand, stocks with tickers consisting of four or five letters have experienced significant success. In fact, these tickers have delivered an impressive average return of 25% over the past year. It is worth noting that popular tech giants like Apple (AAPL), Nvidia (NVDA), Tesla (TSLA), Amazon.com (AMZN), Microsoft (MSFT), Meta Platforms (META), and Alphabet (GOOGL) all sport four-letter tickers. This group of companies alone has achieved remarkable returns of nearly 60% on average.

Looking at these figures, it becomes clear that there is more at play than just a ticker symbol’s length. While the appeal of new technology plays a role in investor sentiment, it is unwise to base investment decisions solely on a corporation’s name or ticker symbol.

In light of this analysis, Monday’s news revealing Raytheon’s new name is certainly interesting. However, it should not guide investment choices.