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Aria Melton
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Aria Melton is a green entrepreneur. She reads widely on economics and environmental issues and supports animal rescue charities. Aria successfully started, operated, and later sold two green businesses. She has a keen interest in investing in companies that make a difference in the world and... More
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Aria Melton - Ethical Investing
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  • I'm An Environmentalist And I'm Recommending An Oil Company

    Yes, you read that correctly.

    I'd love it if every community on Earth could produce enough clean, safe, renewable power to meet all of its energy needs, but in the vast majority of cases, we are simply not there yet. Oil and natural gas companies are going to be with us for a while.

    Some of these companies pollute. Some of them have been linked to questionable business practices, especially in other countries.

    And one is about as close to a model corporation as an oil company can get.

    I first read about Statoil (NYSE: STO) in an article about Scotland's plan to have 100% renewable energy by 2020. Scotland's eastern coast is on the North Sea, known for its strong winds and becoming something of a renewable-energy hub shared with several neighboring countries - chief amongst them Norway.

    I recently blogged about Norway's sovereign fund, which hasn't suffered in the least from focusing on ethical companies. Statoil is a Norwegian company, and the government owns 67% of the company's shares.

    Statoil is the world's 13th largest oil and gas company - not a global dominator, but it has other good points. A look into the company's history showed far fewer controversies than most oil and gas providers (I have yet to find an energy company with a spotless record).

    Statoil's Hydrogen Technologies division is a leader in alkaline electrolysis technology (creating hydrogen and oxygen from water), which could eventually replace depleted fossil fuel reserves. The company has also begun branching out into biofuels, wind power, and geothermal energy.

    Perhaps most impressively, Statoil has publicly stated a goal of "zero harm to people and the environment" and is backing it up with careful water management, waste management, attempting to reduce emissions from their facilities, capturing and storing carbon dioxide, and integrating environmental monitoring on a daily basis.

    Some companies flagrantly violate human rights in faraway countries. Not Statoil. Their corporate policies stipulate human rights and fair labor conditions, including the rights of indigenous people who may be affected by Statoil's operations. The company belongs to the Business Leaders' Initiative on Human Rights, and supports the United Nations and Amnesty International.

    And it gets better: Statoil has an outstanding balance sheet. P/E is excellent at 5.7, and the company pays a 4.1% dividend. I would prefer it if Statoil had a little more cash and a little less debt, but their debt is more than acceptable given the company's high market cap and the equipment-intensive nature of their operations. Statoil's production is also rising, and will likely continue to rise due to recent successful exploration in Tanzania, the Gulf of Mexico, and along the Norwegian continental shelf.

    Statoil's current price is $22.70, and although I would love to snatch it up at a lower price (I am considering selling the October $20 puts), I consider it a good buy under $25. Oil wells and wind farms take time to build, so it may take a few years, but I believe Statoil will deliver healthy returns.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 01 2:22 AM | Link | 1 Comment
  • Are Facebook And Yelp Good Ethical Investments?

    The information age is here to stay. Sometimes, I'm tempted to call it the information-overload age, but that's a story for another time.

    Not so very long ago, entire families often shared one email account (usually a parent's work account), jpeg images took several minutes to load, and the internet was a haven for geeks like me. Now, virtually everything is online. It seems like everyone has at least one email address and spends a significant portion of their lives on the internet.

    The number of Facebook users is inching closer and closer to one billion. At least 50 million people currently use Yelp each month. Facebook is poised to make its initial public offering; Yelp already has.

    Having a lot of users and internet buzz does not, however, make a web-based business a good investment. Experienced investors know it is much more complicated than that. And for readers of this blog, there are ethical issues to consider before buying as well.

    First, let's take a long, hard look at Yelp (NYSE: YELP). Searching and reviewing local businesses is not a new idea; sites like Citysearch offered that opportunity to their users years before Yelp did. Yelp's popularity boils down to a cuter website, a catchier name, rewards for users who are the first to review a business or who are especially prolific, and far greater social networking capability than its predecessors.

    Yelp made its initial public offering a few weeks ago. The stock immediately fell, and the chart has resembled a roller coaster track ever since. The company's business plan depends almost entirely on advertising, something many businesses have had to cut back on in recent years - and may eventually dispense with, since many consumers resent the prevalence of ads and a growing number use ad-blocking software to avoid them. Although Yelp's revenue has grown, the company is still not profitable, and growth will eventually slow to a crawl because there is a limited number of markets left for the company to bully its way into.

    And I do mean bully.

    Yelp has a history of using tactics that I, as an ethically focused citizen and entrepreneur, frown upon, as do my friends who have also owned their own businesses.

    Yelp has already faced class-action lawsuits from companies claiming that Yelp employees offered to remove negative reviews in exchange for purchasing advertising. Some companies who declined to purchase advertising subsequently found that their positive reviews suddenly disappeared. Yelp also claims to have taken measures to prevent fake reviews, but in some cases, negative reviews have obviously been posted by rival businesses, or by users who have clearly never visited the business. One such victim is chef Graham Elliot, who received a one-star review of his sandwich shop before it had even opened - and who claims to have been forced off of Yelp on three occasions for responding to factually inaccurate reviews.

    In the interest of full disclosure, a personal friend of mine has faced this sort of treatment from Yelp. Marla (not her real name) could not afford to purchase advertising, and suddenly found her three best reviews vanish. When she moved her business to another state, she updated the contact information on her business' Yelp profile…and soon discovered that the information had been changed back. Despite several complaints, this wasn't resolved for months.

    An unprofitable company facing legal bills is a recipe for losses. Not only is Yelp a poor investment, the company does not qualify as ethical in the least.

    Moving on…Facebook hasn't IPO'ed yet, but it will probably do so fairly soon. The company is profitable, but its entire business plan is based upon storing and selling user information to marketers. And while the site has more users than Google, there are only so many people in the world with internet access who would be interested in opening accounts - or able to do so. Facebook overconfidently mentioned China multiple times in its SEC filing, but cannot count on ever being unblocked by China's strict censors. And prior to Facebook, several other social networking sites flourished - I won't be surprised if Google Plus or another competitor eventually renders the site obsolete. For these reasons, I suspect the company could be overvalued.

    Facebook is notorious for privacy issues - user accounts are simply not safe enough, as proven when Mark Zuckerberg's private photos were leaked. The company has already been taken to task by the Federal Trade Commission for sharing users' private information, and by privacy advocates for its previous refusal to remove users' profiles upon request. Additionally, ever since Craigslist banned ads for "adult services", prostitution has migrated to Facebook, prompting some concerned citizens to report Facebook to the FBI. And while Facebook did not cause the cyberbullying phenomenon, much of it takes place on Facebook, thus creating the possibility of liability. I wouldn't rule out future lawsuits.

    I don't consider Facebook an ethical company, and I don't consider Facebook a wise investment, either. Investors wishing to profit from internet usage should instead consider established tech stocks like Cisco Systems, Apple, Microsoft, and internet service providers. They will most likely remain profitable no matter which social networks come and go.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Mar 25 11:09 PM | Link | Comment!
  • Hello, Sunshine

    Solar Sense

    As an environmentalist and a fiscally intelligent American, I was not happy when Solyndra went bankrupt after receiving a $535 million loan guarantee. When I found out that Solyndra executives might receive $30,000 bonuses while lower-level employees are still being denied back pay and accrued vacation time, I was outraged.

    Lifelong Sun Belt resident that I am, I believe in solar power. I've used solar-powered gadgets, I've eaten food prepared in solar cookers, and I even know a small business owner whose tiny storefront is solar-powered (thanks to a cooperative landlord). I understand the importance of supporting companies in the clean energy sector.

    However, when buying stocks, it's not enough for these companies to be green. They must also be financially viable. While Solyndra was not publicly traded, it is a prime example of a fiscally unsound business.

    A century ago, there were over a hundred automotive companies, most of them based in Detroit. Now, there are only a few dozen, and the majority are based in Asia. As the industry progressed, the most profitable car companies stayed in business while their less profitable counterparts closed down or faced takeovers, one by one. I believe something similar will eventually happen with clean-energy companies.

    I have read profiles of several dozen companies in the solar power business, and sadly, most of them lack a competitive edge and are simply not growing quickly enough to pay off their debts. That's not to say there aren't a few worth considering.

    First Solar, Inc. (Nasdaq: FSLR) is one of the brightest spots in the solar power field. Like Solyndra, First Solar makes and sells thin-film solar semiconductors, and also makes and sells photovoltaic solar power systems. However, unlike Solyndra, First Solar has one of the best balance sheets in the solar power industry. The company is profitable, is growing, has a P/E under 6, and has $763 million in cash. At $610 million, debt is higher than I prefer, but I consider the debt reasonable for as long as growth continues. First Solar has also recently stated that the company must develop new markets that are not dependent on subsidies, realizing they cannot rely on government incentives to build a healthy business. The stock is currently $36.40 - try and get it under $35 if you can.

    JA Solar (NasdaqGS: JASO) is worth considering. JA Solar is the world's largest solar cell producer, and can manufacture inexpensively due to being based in Shanghai. The company makes and sells solar products under its own name, and also produces solar products for other companies under their brand names. This gives JA Solar a larger piece of the solar-power pie than the average solar company. However, I do not recommend buying the stock just yet. Although the stock is not expensive (at $1.91 per share, anyone can afford a few shares) and P/E is a very low 2.92, revenue has been shrinking significantly in recent months, and the company has more debt than cash. Rather, I suggest watching the stock for the time being, and investing only if the company's debt begins to fall and/or profits begin to rise. I suspect investors have been reluctant to buy JA Solar shares partly because the company is based in China; however, sooner or later, ethical consumers must accept the fact that the majority of solar companies are based in China, and that most solar products use Chinese materials, labor, or both.

    I'm also watching Yingli Green Energy (NYSE: YGE). This photovoltaic product company, also based in China, has a global presence and a decent balance sheet. P/E is under 4, growth is good, debt isn't too terrifying, and the company has nearly $1 billion in cash. It's true that there are larger solar companies, but Yingli is making a profit while several of the biggest players are losing money and going deeper into debt. As an added bonus for ethical investors, earlier today Yingli's US subsidiary renewed its GRID Alternatives partnership, which provides solar-electric job training and inexpensive solar power to low-income California residents (the project will soon be introduced in Colorado as well). Today's price is $3.91; consider buying under $4.

    Like the deep collapse of the automotive industry before World War II in the US, we should probably expect a number of solar firms to fail. They operate capital-intensive businesses in a highly competitive environment. If you choose, do so carefully - and use stop-losses so you don't get burned.

    If you decide that FSLR has merit at $36.40, an interesting way to play this company is to sell the April $35 puts for $3.25 or better. If the stock declines and you get put, you're paying $31.75. If the puts expire worthless, you've collected a healthy premium.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Mar 13 6:22 PM | Link | Comment!
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