The Oberlin Review
<< Front page News December 3, 2004

Money Talks
Value investments: morals and money

Hey kids, did you miss me? Well, it sure feels good to be back. For this week’s column I was going to focus entirely on value-style investing, until I read the headline in last week’s Review declaring all Coca-Cola (ticker: KO) products banned from campus. Well, good for Oberlin, if that’s what the students want. I personally would love to see trucker hats and Pabst Blue Ribbon banned as well, so call me if you want in on my committee.

My only problem is that the two companies I found that make for great value investments are, well, evil companies. Coke is one of them. The other is Merck (ticker: MRK). I can’t just jump in and tell the population of the most progressive campus outside of Sweden to invest in evil companies without addressing moral issues inherent in investment, so that will be my focus this week.

The money raised by selling stocks only goes to the company at the initial public offering (IPO). Say Ma Kettle wants to raise some capital to grow her jam company. She can issue an IPO and sell ownership shares of her company, keeping the majority of shares which allows her to still own the company. In the process, she will probably get stinking rich, have enough money to buy a new manufacturing plant, enter into more contracts with fruit growers and start a huge marketing campaign (“Ma Kettle ‘bout the Jam, fool!”).

However, if you buy stock in Ma Kettle’s company after the IPO, she doesn’t get any additional money for it. It doesn’t affect her one bit if you buy the stock or sell it. She would like the stock to go up, since she is the majority shareholder, but your money does not go into a single jar of her funkalicious jam.

Owning the stock means that you are entitled to some portion of her profits, either in the form of dividends or in higher share prices, often created by stock buy-backs. You can then sell the stock to somebody else and reap the rewards of prudent investing.

In my mind, a good investment is a good investment, be it with Microsoft or Coke or Exxon or what have you. Your owning stock in a company does not imply tacit collusion with that company. You may even profit off of the bad name, as many companies that make great investments have terrible public reputations.

But shouldn’t we care what the companies do? What if they abuse cheap labor or poison the environment?

I believe in public dissent and protest. I believe in standing up for your beliefs. I also believe in a clean environment and good labor practices.

However, if a person is picketing Coke and also owns the stock, does that make them a hypocrite? Hardly. They are a true patriot to their cause. Why? Check it.

A stock or bond is paid by the company in question. If I hate a company, I have an additional moral incentive to buy their stock, assuming of course it is a good investment. By owning their stock, I am taking some small sliver of their profits and can then reinvest that money into ethical causes.

Imagine what would happen if all of the members of the Nature Conservancy and Greenpeace bought large chunks of Exxon, made large profits and reinvested those profits into renewable fuels. I’ll tell you. They would have taken those profits away from investors who don’t care the way we do and who don’t understand that the bottom line is not the bottom line. They would have, in a sense, forced Exxon to financially support renewable energy. That’s what I call activism.
 
 

   

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