The stock market doesn’t care about your political beliefs. This is what matters instead.

That’s important to remember as you consider the ETFs that cater to investors of particular political affiliations. These funds’ value proposition isn’t just that they allow you to align your investments with your beliefs, but that doing so will improve your investment performance. Needless to say, it can’t be the case that both Republican-leaning and Democratic-leaning ETFs will consistently beat the market.

In fact, both are likely to lag over the long term. The nearly universal conclusion of academic research is that you forfeit long-term return when you restrict the universe of stocks in which you can invest. And that’s true whether your restriction is motivated by Democratic or Republican loyalties.

Consider the following three ETFs that have been created in recent years:

• The American Conservative Values ETF
  ACVF,
  which invests in companies that support “conservative ideals, beliefs and values.” According to the fund’s website, it “is based on the conviction that politically active companies negatively impact their shareholder returns.”

• The Democratic Large-Cap Core Fund
  DEMZ,
  which invests in “companies that have made over 75% of their political contributions to Democratic causes and candidates.”

• The Point Bridge GOP Stock Tracker
  MAGA,
  which “is made up of 150 companies from the S&P 500 index whose employees and political-action committees (PACs) are highly supportive of Republican candidates.”

As you can see from the accompanying chart, the DEMZ and MAGA ETFs have lagged the S&P 500 since their launch dates, while the ACVF has slightly beaten in. Don’t conclude from this that the ACVF is a better bet than the other two; earlier this year, when I ran a similar chart, DEMZ was ahead of the S&P 500
SPX
and ACVF was behind.

A bipartisan portfolio

You might be surprised to learn that there is no shortage of stocks that are owned by both the DEMZ and either of the Republican-leaning ETFs—29, in fact. And there are two stocks that are each owned by all three ETFs: Kimberly Clark
KMB,
+0.08%
and Paychex
PAYX,
-0.31%.

I’m not surprised by this large overlap, however, since my suspicion is that, when push comes to shove, profits trump partisanship. As the ACVF ETF writes on its website, it pursues its political agenda so long as it doesn’t sacrifice performance.

My suspicion was reinforced when I analyzed how many of these three ETFs’ current holdings are also recommended for purchase by one or more of the top-performing investment newsletters my firm monitors. None of these newsletters uses political considerations when choosing stocks to purchase for their model portfolios. Of the stocks owned by DEMZ, 49% are currently recommended by at least one of these newsletters. The comparable percentages for ACVF and MAGA are 45% and 47%, respectively. The difference between these percentages is not statistically significant.

These three ETFs may not be as different as their marketing materials make them seem.

In this spirit of (nascent?) bipartisanship, the list below contains the stocks that are owned by both DEMZ and either ACVF or MAGA, and which also currently are recommended for purchase by at least one top-performing investment newsletter.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com