How Do Hedge Funds Impact Companies?
This might be a dumb question so please bear with me here, but do short-term focused hedge funds actually have any impact on the companies they invest in? I have gotten the impression that some investors in hedge funds seem to believe that hedge funds shouldn’t invest in certain industries because those industries are bad, which doesn’t really make sense to me. If a HF is betting that oil company XYZ is going to beat on earnings, what’s the issue with buying the stock and then selling after earnings? It’s not like the oil company is actually going to receive the money from the hedge fund’s investment. I know that this would slightly push up the price which may make it easier for the company to raise capital in the future, but I assume there is some other reason I am missing here on why some investors think it’s immoral to invest in certain companies.
TLDR: If you think it’s immoral to invest in certain companies, does it actually make a difference whether you buy the stock (assuming you are betting on a short term catalyst like earnings)
Seems like very little impact from the hedge funds to me. Totally agree there is little impact to the underlying business with short-term oriented trading/investing style that has become popularized. Also, people who say “don’t invest in oil companies” are completely braindead. Investors are just buying claims to cash flows to earn a return. the better class of solutions—not that I personally think oil companies are that bad—is to figure out how to render these company’s unprofitable (i.e. you yourself essentially stop using oil and encourage others to do the same as well as encouraging government regulations or sum).
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