Utility is an economic term meaning to derive value from. I derive value from this tuna sandwich. Meaning, I enjoy eating it.
End-user just means that I’m the person who actually uses the tuna sandwich. As opposed to the person who sold me the sandwich.
Stocks have an end-user utility too, although that utility may not be so obvious. Stocks’ utility is derived from the cash they spin off. The easiest example is dividends. Remember stocks are productive assets because they are controlling stakes in businesses. Everyday thousands of some of the brightest, hardest working, and often under-paid, people go to work for your stocks. Stocks are a claim on the fruits of their labor. You have a claim on the profits of the company. The easiest example is dividends.
But even stocks that do not pay dividends have end-user utility. That utility is ownership. Even if you can never hope to acquire the 51% of shares necessary to own a controlling interest in the company, there are others who can. So your shares still have ownership value. Think of a dairy farmer. Does it matter if the farmer is lactose intolerant or not? Is the milk he sells worth any less? Of course not. It’s the same with your shares. Just because you cannot ever derive utility from owning a controlling stake in the company, your shares still have ownership value.
Written 2015