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Nick Mackintosh
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My name is Nick Mackintosh, born in May of 1988 and I am currently residing in London, UK. I got involved in the financial markets during 2010 after my poker career ended due to online poker becoming illegal in the USA. The 2 things I most enjoy in my life are card games and the stock market,... More
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  • Do You Let Moral Values Impact Your Investing Decisions? 3 comments
    Jul 13, 2014 4:34 PM | about stocks: BA, BP, BTI, CVX, DEO, IMBBY, LMT, MCD, MO, PM, RDS.B, RTN, SBMRY, XOM, YUM

    In the words of Gordon Gekko "greed is good, greed is right, greed works". I'm of the opinion that he is entirely right when giving this speech in the notorious movie "Wall Street". The whole point of greed is to always want more and a desire to become wealthy and powerful. Many investors and in fact many of the best companies think like this, it's not competition that drives companies to do better (though it is a big component for success), it is the desire to be the leader in their sector. However... how often do you consider the consequences of these actions when you as an investor try to become financially independent?

    Lets look at the sectors and how they may have a negative impact from an ethical standpoint with regards to the population.

    Consumer Goods

    Tobacco: This is a tough subject as my grandmother died when I was only 3-4 from oesophagus cancer due to smoking. My grandfather has bronchitis due to second-hand smoke.

    There are nearly 1 billion smokers in the world with 80% living in low and middle income countries. Almost half of the world's children breathe air polluted by tobacco smoke. Tobacco use approximately kills 5.4 million a year killing up to half of all users and is a risk factor for 6 of the 8 leading causes of deaths. Tobacco is extremely addictive and unfortunately most users are unable to quit due to the medication such as nicotine replacement therapy (skin patches / chewing gym / inhalers / tablets), Zyban and Champix are inadequate.

    Beverages: Most people like a drink at social gatherings or special occasions (sometimes accompanied by tobacco product!) but alcohol is also responsible for the deaths of 3.3 million a year. It's responsible for more than 200 disease and injury conditions and 25% of the deaths happen between the age group of 20-39 years. There is also a known relationship between harmful alcohol use and a range of mental and behavioral disorders. Alcohol is a psychoactive substance with dependence-producing properties which means that it also causes addiction.

    Fast Food Restaurants: It is known that people can get a food addiction due to the foods that are rich in sugar, fat and salt. This is because it produces a feel-good brain chemical such as dopamine. The reward signals for highly palatable foods may override other signals of fullness and satisfaction and as a result the person keeps eating even when they're not hungry.

    Approximately 3.4 million adults die each year as a results of being overweight or obese. Overweight and obesity is a major risk factor for diseases such as cardiovascular disease (heart disease and stroke), diabetes, musculoskeletal disorders such as osteoarthritis and some cancers.

    The movie SuperSize Me comes to mind when thinking about McDonald's Corporation (NYSE:MCD). They are not entirely the culprits though because of you were to go into the grocers, most of the time you would find that fruit and vegetables usually cost more than a hamburger! So if you think about the dollar cost to provide a meal that would fill your stomach, some of us are guilty and choose fast food.

    Basic Materials

    Oil Companies: Oil companies produce a large amount of wealth for countries and also for themselves. However there have been a huge amount of oil spills that massively impact the marine ecology by not only killing wildlife but also the natural habitat they reside in. This has a knock-on effect on our own economies when the price of oil rises which causes havoc to a number of different industries, not to mention fishing and tourism that were the hardest hit. The oil spill on everyone's mind is the Deepwater Horizon oil rig (Gulf of Mexico oil spill) that happened on 20th April 2010 on the BP-operated Macondo Prospect.

    Industrials

    Military Companies: This is perhaps the only 1 that can't be controlled, every country in the world has a defence budget used to protect its citizens and its sovereignty. However in acts of war how many innocent civilians lose their lives due to the use of such weapons? The war on Iraq has led to the deaths of 126,003 - 140,710 civilians and this is being documented here. This is just an example as I could also include Afghanistan, Syria, Libya, Egypt, Ukraine or the ongoing crisis in the Gaza Strip. Not to mention of course all the wars throughout history.

    Conclusion and Admission of Guilt

    If you have read any of my previous articles you would know that the tobacco companies British American Tobacco and Imperial Tobacco are my biggest holdings in my portfolio. I love sin stocks as I know that addiction will create revenue that is easy to estimate.

    Now to some of you this could be morally wrong as I'm using the weakness of human psychology to my advantage, hence this discussion. However as an investor I'm picking safe companies that wont fluctuate in revenue too wildly, other examples are utilities as everyone needs to pay their bills regardless of economic conditions.

    I could also look at the positive side and say that these companies create a massive amount of tax revenue that can be used in many different ways to benefit our society. A few examples that the money is used for could include infrastructure, healthcare or public services.

    At the end of the day my opinion is that my investment wont impact or create change in the world around me, only if I was a significant shareholder may I have the power to influence change. As much as I would like to make the world a better place, its not something worth dwelling on and the time should be used for the primary goal of investing. For me that is to create enough wealth to retire early and leave a legacy for my family to enjoy for generations.

    If we are to look at the companies in these sectors described: Phillip Morris (NYSE:PM), Altria (NYSE:MO), British American Tobacco (NYSEMKT:BTI), Imperial Tobacco (ITYBY), SABMiller (OTCPK:SBMRY), Diageo (NYSE:DEO), McDonald's Corporation , YUM! Brands (NYSE:YUM), Royal Dutch Shell (NYSE:RDS.B), Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP), Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTN), Boeing (NYSE:BA).

    How many of us have these companies in our portfolios? I would assume 90% of us do, but how many of you take the time to consider the negative impacts? Do you let morality get in the way of profit or can you admit to investing 100% ethically? Feel free to comment and discuss!

    Disclosure: The author is long BTI, ITYBY, RDS.B, BP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: All information used can be found on the World Health Organization website here: www.who.int/topics/en/

    Stocks: BA, BP, BTI, CVX, DEO, IMBBY, LMT, MCD, MO, PM, RDS.B, RTN, SBMRY, XOM, YUM
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Comments (3)
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  • anarchist
    , contributor
    Comments (1940) | Send Message
     
    As you imply, the small investor has no say in what any large company does. Obviously some investors have enough money to make changes. Ackman and Icahn are aggressive investors that make a living at changing companies that don't want to be changed and Buffett probably has a say in the companies he invest in or perhaps he will just buy them.
    So, for the small investor "moral compass" stocks and funds are a waste of time.
    I make a decent living selling options mostly and if I worried about the moral values of the company I would not have many stock to trade. The average option trader isn't all that concerned about a company other than its price in a short time frame.

     

    Just as an aside I am not sure if Costa Rica has a defense budget but I understand they have no military.
    cheers and good tracing.
    21 Jul 2014, 12:43 AM Reply Like
  • Nick Mackintosh
    , contributor
    Comments (512) | Send Message
     
    Author’s reply » I should have mentioned the infamous activist investors, thanks for adding :)
    21 Jul 2014, 05:34 AM Reply Like
  • One Guy and a Calculator
    , contributor
    Comments (7) | Send Message
     
    Withholding investments in any company is a waste of time and potentially a waste of a good investment.
    1. if you buy stocks in the secondary market, it does not effect the company directly(unless your trying to go for majority or minority control), hence you won't effect any directors/exec's behavior.
    2. lets say you have a company you don't like, and alot of other people don't like it(tobacco), well alot of people might not be investing in it. This preference could lead to a depressed share price, which leads to a increased yield(if dividends are paid). You could take your above average return to donate to social activist campaigns that directly oppose what this company/industry is selling.
    18 Dec 2014, 03:39 PM Reply Like
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