How Millennials are Reshaping the Investment Landscape

Persistence and resilience only come from . . . the chance to work through difficult problems.

– Educator and computer scientist Gever Tulley

Difficult problems? Meet the Millennials. With an estimated population of over 72 million, they are now the largest demographic in the U.S., surpassing Baby Boomers.

No question, those born between 1981 and 1996 grew up in uniquely disruptive times. The events of 9/11 defined their adolescence; the Great Recession of 2008 dogged their entry into the workforce; COVID marked their passage into middle age: All these factors have forced them to forge a different kind of life.

How so? Here are just some examples. They have more money to spend—on average about $76,000 per year—than every generation other than Gen Xers. Yet given a prohibitively expensive housing market, they tend to see themselves as forever renters. For that matter, they love the notion of renting everything—clothes, cars, services—rather than owning.

They’re a highly educated group. Yet layoffs, McJobs and labor force uncertainty have pushed many into self-employment.

They’re consumers, to be sure. But it’s not necessarily physical goods they’re after. One study found that 78 percent of Millennials prefer spending money on experiences rather than products. And when they do shop for products, environmentally-friendly ones are top of mind.

What does this mean for the market? Investors may benefit by aligning themselves with smart companies picking up on Millennials’ evolving attitudes and desires.

The rental mindset

One such firm is Invitation Homes (INVH), which leases single-family dwellings to those who can’t afford to buy or who simply prefer to rent. While the company has been shedding some of its housing stock since the end of the pandemic, some analysts still predict above average returns for INVH shareholders in coming months. At least nine market watchers have given it a “moderate buy” rating.

Millennials are also a restless bunch, inclined to move every two years. And where there’s a move, there’s a need for storage. That’s helping boost shares in companies like Extra Storage Space (EXR), which reported Q3 revenue of $748 million, above the $680.6 million that most analysts anticipated.

Big on gigging—and growing businesses

Upwork (UPWK) is another enterprise with strong Millennial appeal. The California-based platform for freelancers reported that in 2022 some 46 percent of professionals in that age bracket took on freelance work. Upwork is doing well in the process: The company just posted revenue of $175.7 million in Q3, substantially beating expectations. What’s more, its shares have gone up by nearly 700 percent since last spring.

Some Millennials are outgrowing gig work to become fully-fledged entrepreneurs. And they’re reshaping the marketplace according to one CEO. More than a few are turning to learning platforms like Coursera (COUR)—listed a “buy” by at least six analysts—to sharpen their business skills. That may well be contributing to Coursera’s recent Q3 results, which exceeded expectations. Revenues were up over 21 percent year on year to $165.5 million.

Action speaks louder than “things”

As mentioned earlier, Millennials are hot for experience. That’s helping fuel the stock price of Live Nation Entertainment (LYV), which owns concert merch and ticket dispenser Ticketmaster. A big bump in Live Nation stock was not surprising since the firm is the force behind record-shattering Taylor Swift and Beyoncé tours. Earlier this month, the company announced its strongest quarter ever, to the delight of shareholders.

Generation green

Still, while experience rules, this demographic loves toys and is outspending other generations on phones, games and software. But Millennials are discerning consumers who seek out products that reflect their values. They want to support manufacturers who don’t use unethical suppliers or conflict minerals, for example.

That gives an edge to businesses like Lenovo Group Limited (LNVGY), which gets a thumbs up from Leafscore, a website that highlights sustainable products. True, that hasn’t helped Lenovo’s Q3 revenue—it fell by 16 percent in 2023 compared to last year. But the dip may reflect a post-pandemic reality: There’s less demand for electronics as people get out more or return to offices. Given time, though, Millennials will want to replace their aging systems and will likely turn to companies with the greenest creds.

The convenience of subscriptions

Another trait that some firms are catering to? Almost all Millennials—95 percent, by some estimates—have one kind of subscription or another. That makes investing in such services—Blue Apron Holdings (APRN) is one—an appealing prospect.

Millennials have had it tough. But they’re resilient, and their buying power is poised to dominate the market. Backing the companies that back this huge throng of humanity seems like a pretty safe bet.