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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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  • Water, Water Everywhere - But Is It Safe to Drink?

    Roughly three-quarters of the Earth's surface is water, and most of it is sea water. An estimated 1% of the planet's water supply is drinkable. And all seven billion people sharing this world need water to survive.

     

    Even people living in large, relatively wealthy cities can't always count on the water supply being clean enough. I lived in Los Angeles as a child and will never forget having to bathe in rust-colored water on a regular basis. 

     

    Bottled water seems like the answer, but it isn't. Less than one-third of plastic water bottles are recycled, and the bottles may leach BPA (a known endocrine disruptor and possible carcinogen). Bottled water is tested less often than municipal water, and sometimes turns out to be less clean than tap water. Transporting bottled water also uses up energy and fuel. 

     

    How can we do something about this? Better yet, can we do something and make a little money at the same time?

     

    I've been using water filters since I was in college, and have had generally good results. Being able to purify water at the tap saves energy and raw materials, is cost-effective, and may be safer than buying bottled water or relying on possibly-tainted municipal sources. As a bonus, water often tastes much better after it has been filtered.

     

    Several publicly traded companies manufacture and sell water purification systems and supplies. I'm watching Pall Corp. (NYSE: PLL), a company that seeks to not only purify water, air, food, and medicine, but to do so in a way that reduces harm to the environment. Newsweek Magazine recently dubbed Pall a top green company.

     

    Pall Corp has a long list of products with purposes including, but not limited to:

     

    • Recycling and processing wastewater from multiple sources
    • Reusing wastewater from photovoltaic wafer production (part of solar panel manufacturing)
    • Recycling military hydraulic fluid
    • Purifying drinking water
    • Extending the service life of filters
    • Recycling raw materials
    • Maximizing the life and yield of chemicals
    • Monitoring the quality of air and water
    • Producing clean drinking water for cities and state parks

     

    Pall Corp. is a leader in the purification and filtration field, and agreed to acquire its Brazilian distributor, Engefiltro, last summer. This will no doubt help the company to increase its sales in Central and South America, where water supplies are not always reliable. In some countries (Mexico comes to mind), unfiltered tap water is simply not safe. 

     

    The company is expected to grow at double-digit rates going forward, and has a strong balance sheet. Selling at less than 17 times forward earnings, and a forward EV/EBITDA below 12, the company is reasonably valued.

     

    Besides the Americas, Pall Corp.'s sales are growing quickly in Asia - home to billions of people who all need safe drinking water. India and China in particular have problems with waste water management as well, and Pall Corp. products may help with cleanup. Since the stock is not statistically cheap, I recommend selling the June $55 puts. If the stock falls to $55 or below, you will end up buying it at a better valuation. If the stock stays above $55, you can keep your cash and we can have another conversation in six months!

    Tags: PLL, water, green
    Jan 15 10:16 PM | Link | Comment!
  • Thinking Forward with IBM


    We think of IBM (NYSE: IBM) as a company that makes computers and artificial intelligence, but they didn't start out that way. Founded a century ago, the company initially made tabulating machines, scales, and time recorders, but constantly adapted its products and practices to reflect a fast-changing world. All this and an ethical company too!

     

    IBM was a forward-thinking company long before the concept became widely known, let alone adopted by others. They were among the first employers to provide group life insurance, survivor benefits, and paid vacations. IBM has provided equal pay for equal work since they started training female employees in 1935, trained and employed disabled applicants since 1942, and insisted on building racially integrated workplaces in Southern states years before it was legal to do so.

     

    In 1953, company president Thomas Watson Jr. stated in a company-wide letter that IBM needed to hire the best people, regardless of their race, ethnicity, or gender. The company's nondiscrimination policy was expanded to include national origin and age in 1961, and sexual orientation in 1984. All of these policies were controversial, if not shocking, when they were adopted. In 2011, it's easy to forget how extraordinarily progressive IBM's policies have been throughout the company's history.

     

    IBM stated that maintaining such an open-minded policy actually worked in the company's favor, since they would be hiring talented workers that competing firms would turn down. I believe they were, and still are, correct. After all, it was IBM that developed a great many things that have revolutionized the world - most notably ATMs, magnetic stripe cards, UPC barcodes, and the SABRE airline reservation system. Earlier this year, Jeopardy! viewers got to see IBM's Watson computer, one of the most advanced artificial intelligence systems created to date, beat two of the game's most notable champions. (IBM even split Watson's $1 million prize between two charities.)

     

    IBM looks to the future, not just the present. This mindset will no doubt contribute to the company's never-ending list of innovations. It will be interesting to see what IBM develops with its current cash balance of over $11 billion. The company does have roughly $30 billion in debt, but since EBITDA is $26.4 billion, I consider the debt level more than acceptable. Currently, IBM is collaborating with Japanese firm Tokyo Ohka Kogyo Co. Ltd. to develop cheaper and more efficient solar cells, which will enable wider adoption of solar power. Demand for cleaner, less costly energy is on the rise, and IBM can expect healthy profits if their efforts go well.

     

    I'm sure we all wish we'd bought IBM stock way back in the 1950s when it was a nickel a share - or last August, when it dropped to $122.78. I believe that, with IBM, the best is yet to come. I suggest buying under $185. IBM should pay off nicely in the coming decades - fitting for a company that has often been ahead of the times.

    Tags: IBM, ethical, tech
    Dec 29 12:01 AM | Link | Comment!
  • Ethical Investing, Lesson 10: Green Is Good

    Only one planet - Earth - is currently known to be capable of sustaining human life. If this planet becomes uninhabitable, nothing else will matter. Wealth isn't a bad thing, but we can't eat money. Therefore, the wise ethical investor places a priority on environmentally friendly companies. Companies with a commitment to the environment may encompass a wide variety of industries, including but not limited to green energy and green products. Even activities which are not traditionally endearing to environmentalists can make a contribution to sustainability.

    Greener Defense

    The U.S. military performs an essential service that should not be overlooked or undervalued. However, the Department of Defense, as an organization, is the largest consumer of petroleum-based products on the planet. Tanks, humvees, helicopters, ships, and submarines all need to be powered and fueled. Military personnel are sent to many different countries, requiring more fuel to be used. And, of course, military bases all need electricity.

    Environmentalists and anti-war activists point out that ending current conflicts and withdrawing troops from areas where their presence is not strictly necessary would save resources, money, and lives. This may be true, but it is not necessarily the entire answer.

    Enter Boeing (NYSE: BA) and Siemens (NYSE: SI). This summer, these companies announced their alliance, with the intention of developing and marketing smart-grid technology for the U.S. Department of Defense. This initiative is, of course, only a small portion of the business generated by these two global corporations.

    I previously wrote about smart grids for Greenopedia. In a nutshell, smart grids match the varying supply of electricity systems to the varying demands of consumers. Smart grids are cost-effective, and are less vulnerable to blackouts, natural disasters, and - of great importance to the DoD - terrorist attacks. In the event of a disaster, smart grids can be used to re-route the power supply around a service disruption, quickly notify repair crews of the disruption's location, and ration business or residential power to keep emergency services running smoothly. Additionally, Siemens and Boeing's proposed smart grid technology would integrate renewable energy.

    The DoD is the federal government's largest energy consumer, so if smart grid technology was implemented on military bases, the savings in both energy usage and taxpayer funds could be substantial. Loss of productivity due to power shortages would likely decline as well. 

    Boeing is a great company with a solid balance sheet. It's one of the world's leading defense, security, and aerospace businesses, and the biggest manufacturer of military aircraft. Valuation is good, and the stock pays a 2.5% dividend. The stock has also fallen from its May high of $79.95 to $71.01, so it's not a bad time to invest.

    Siemens is a well-established industry leader in electronics and electrical engineering, known for developing high-quality, innovative technology. At $92.83, the stock is very close to its 52-week low (Siemens hit $145.94 in April), and pays a 3.2% dividend. The company's balance sheet is very strong. Siemens' price to cash flow and P/E are now unusually low, providing an opportunity to buy under $93, a price which reflects fear of a European debacle. Siemens will power through (pun intended) any such events, and ultimately provide satisfying shareholder returns.

    I like the benefits of smart grids, I like Boeing and Siemens' proposed secure smart grid technology, I like Siemens stock under $93, and I like Boeing stock under $72. Ethical investors may need to be patient, however - smart grid technology is continually being fine-tuned, and it may be a few years before the first smart grid is implemented on a military base.

    Written 12/18/11

    Disclosure: I do not own, and do not currently plan to purchase, any shares in Boeing or Siemens.

     

    Dec 18 10:25 PM | Link | Comment!
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