Keeping It Local: Stock Picks From A Nashville-Based Fund

Keeping It Local: Stock Picks From A Nashville-Based Fund

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Imagine owning a piece of your city. Not simply paying taxes – but having a real stake in the companies that employ your friends, family, and neighbors. It's an intriguing idea, one that is likely to appeal to advocates of investing in your local economy, as opposed to the sometimes obscure and distant companies that can be found in mutual funds, IRAs and individual portfolios.

And therein lies the question that investors are asking about a new exchange-traded fund (ETF) – the Nashville Area ETF (NASH) – which began trading on the New York Stock Exchange this morning.

The premise is actually rather simple. The Nashville Area ETF, which opened at $25.00 per share, is made up exclusively of publicly traded companies that are headquartered in the Nashville area: think Dollar General (DG), Tractor Supply Co. (TSCO), and Cracker Barrel (CBRL). The goal of the fund's founders, LocalShares Inc., is to start moving the concept to other cities. Nashville was chosen as the launch site because it boasts business-friendly tax rates and a growing, youthful population. 

Reactions to this new style of ETF have been mixed so far. Similar initiatives to start state-based exchange-traded funds in Texas and Oklahoma failed for want of buyers. Many investors are dubious of the idea of placing all of your money in a single area code. One of the key tenets of portfolio management is to diversify. A Hurricane Sandy-like disaster or political scandal could theoretically gut a fund's value in a single day. Buyers are essentially betting that the entire region will grow as a whole – a model that seems unlikely to translate to regions without much institutional diversity, or those with few signs of economic growth. As many skeptics have pointed out, almost half of the companies traded in NASH are in the same sector: healthcare. 

On the flip side, an argument is being made by two fellows at the Brookings Institution entitled The Metropolitan Revolution: How Cities and Metros are Fixing our Broken Politics and Fragile Economy. The book's authors, Bruce Katz and Jennifer Bradley, discuss how dysfunction in the Federal Government is leading many local governments to start solving their problems on their own. Using the example of industrial, Northwest Ohio, the book explains how economies can be strengthened by focusing on more local partnerships between entrepreneurs, schools, infrastructure and capital. 

They go on to examine how the traditional mode for economic development in the United States has focused on national growth – the building of convention centers and the courtship of national chains. However, this isn't necessarily the best way to build on a region's specialties and distinct advantages – the things that city can do better than any other. ETFs focused on specific locatsion would put investors much closer to the companies they are investing in. What is more, people who are turned-off at the idea of sending their money across the world to some glamorous hedge-fund or major corporation might feel differently about sending it around the corner. And in this case, that could mean more capital for Nashville businesses. 

Will Nashville's publicly traded companies benefit from this approach to investing? Use the interactive list below to begin your own analysis. 

The List

1. Tractor Supply Company (TSCO, Earnings, Analysts, Financials): Operates retail farm and ranch stores in the United States. Market cap at $8.44B, most recent closing price at $121.15.



2. Dollar General Corporation (DG, Earnings, Analysts, Financials): Operates as a discount retailer of general merchandise in the southern, southwestern, midwestern, and eastern United States. Market cap at $17.88B, most recent closing price at $54.67.


3. HCA Holdings, Inc. (HCA, Earnings, Analysts, Financials): Offers health care services in the United States. Market cap at $17.33B, most recent closing price at $39.0.



4. Acadia Healthcare Company, Inc. (ACHC, Earnings, Analysts, Financials): Develops and operates inpatient psychiatric facilities and residential treatment centers in the United States. Market cap at $1.84B, most recent closing price at $36.87.


5. Corrections Corporation of America (CXW, Earnings, Analysts, Financials): Operates privatized correctional and detention facilities in the United States. Market cap at $3.31B, most recent closing price at $33.05.


6. Cracker Barrel Old Country Store, Inc. (CBRL, Earnings, Analysts, Financials): Engages in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept in the United States. Market cap at $2.33B, most recent closing price at $97.90.



(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)


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