PROFIT BEFORE INTEGRITY?
By J. Paul
Do you know what your stocks are doing, besides making money? Perhaps not. After all, you invested in a company to watch your money grow. If it fails to do so, then you would have some concerns. Some of you may know very little about a company except that your broker recommended it. Maybe a few of you did your own research before investing, but no further than financial reports and earnings estimates. You may even have a technical analysis program and did most of your research by pouring over price charts, but, beyond that, you did very little investigation into exactly how the company conducted its business.
Let me tell you a true story. One of my colleagues is very socially-conscientious. A wonderful teacher, she cares about her students and has the highest regard for them. Her lifestyle is exemplary - a devoted mother and grandmother, a creative writer, a deeply spiritual person, a vegetarian who stays trim and healthy. Last year, she bought stock in McDonald's. When I asked her about it, she replied that her broker had expected it to move up. That was all it took to make her decision.
It seems a little ludicrous to me that a person can have a right livelihood and maintain a socially responsible lifestyle in every way except with their investments. When it comes to the stock market, the resounding phrase is: Profit first, Integrity second.
Of course, there are some who are truly concerned about the "company" you keep, so you did a little soul-searching and then invested in a so-called "green" fund. But how do you know each company in a green fund is actually "green"? And how do you know which stocks a fund actually holds at any given moment. The answer is, you don't.
The only one who knows what stocks are in a fund at a particular instant is the fund manager. As far as how "green" each company is, the manager may know less than most investors. Fund managers do not have the time to thoroughly check all the business activities of each and every firm in their fund's portfolio plus those of the dozen or so firms that they have waiting in the wings. Except for a phone call or two to a company's investor relations department, what checking a manager does may not go much beyond the fundamentals or technicals.
Many investors, including fund managers, just assume that a pollution control company controls pollution, or a waste management firm manages waste. But many of these firms are actually adding to our environmental problems rather than solving them. Instead of managing waste, they are piling it into dumps and landfills, creating an extremely toxic, potentially hazardous situation. For example, BFI, a subsidiary of Browning Ferris, recently pleaded guilty to charges arising from the illegal disposal of waste water treatment sludge at five publicly-owned treatment facilities in Pennsylvania and Delaware. American Disposal, which has a history of non-compliance with the E.P.A., was recently cited by that agency for hauling asbestos waste without filing the necessary reports.
Furthermore, many large-cap waste management firms are huge conglomerates dealing in a variety of diversified businesses. Take Republic Industries for example. Listed as a waste management company, Republic has rapidly become the nation's largest owner of car dealerships. One does not have to be an environmental engineer to realize the effect automobiles and especially the burgeoning recreational vehicle fad has had on the ozone layer.
But, if you are a concerned investor, where do you go to find out if the stocks you hold are environmentally friendly? Well, the internet is an excellent place to start. First, check for news on your stock. Almost any search engine will do. All of them have links to business news sites such as Reuters, the Wall Street Journal, CNN, MSNBC and the like. You can also subscribe to a business news retrieval service like Dow Jones which imports news items on a particular stock directly to your computer. For specific news on pollution control and waste management firms, there are two informative sites: www.envirobiz.com and www.pollutiononline.com .
Envirobiz offers news on a wealth of environmental companies. But beware! Most of the "news" is generated by company press releases with an occasional release from the EPA about a cited violator. Envirobiz also offers information on new products, business opportunities and conventions and events.
Pollution Online is set up much like Envirobiz. Its pollution news page is comprised mostly of weekly press releases put out over a two month span with the most recent week first. Pollution Online maintains a Suppliers Marketplace, a Discussion Forum, an Engineering Marketplace, Employment Opportunities, and Resource and Download libraries which you might want to check out if you need to do some extra research. Other websites that can provide useful information are Market Guide, Hoovers, Stockwiz, Stocksmart and Stockmaster.
Www.marketguide.com and www.hoovers.com are both basically subscription sites. They provide a very brief company sketch along with some fundamental price data and the latest news free of charge. If you want more extensive data and a company profile, you can either pay per item or subscribe to the service for a monthly fee. Market Guide also lists firms by industry and sector free of charge. Hoover's does not. Www.stocksmart.com lists some of the price data that you must subscribe to with Market Guide and Hoovers. Stocksmart can also break down the companies by industry and rank and compare company P/E (price to earning ratio) with the industry P/E. A price chart is also available. The information at www.stockmaster.com is very basic. It gives fundamental price data along with a chart. It has a link to Baseline which is a paid service providing further historical price information. Although www.stockwiz.com does not provide very much of its own information, it does have quick and extensive links to other services for news, quotes, historical charts, earnings, S.E.C. filings and more. One of the links you may want to try or go there directly is www.wsrn.com. The Wall Street Research Network provides a vast amount of information on fundamentals and earnings plus links to dozens of other sites, some free and some paid, for further data.
For those of you who prefer to do your research in a library rather than in front of a computer monitor, there are three reliable sources to check. VALUE LINE lists every stock on the New York Exchange as well as 1700 Nasdaq stocks by industry. The reports are published weekly and span an entire year, so you may have to count on spending some time there. Another source is STANDARD & POOR'S MARKET ENCYCLOPEDIA which lists all of the New York and American Exchange stocks along with the major Nasdaq stocks. The third source is HOOVER'S HANDBOOK OF AMERICAN COMPANIES, also a valuable resource and perhaps gives the most details on a firm. But don't expect to find any of those small cap or OTC Bulletin Board issues in either publication.
Though it takes more time than simply calling up your broker and asking for a recommendation, researching environmentally-friendly stocks can be both rewarding and fulfilling. You may not have to give up your integrity to have your money earn more than a bank CD. With some patient searching and due diligence, you will hopefully be able to own "green" stocks that keep your brokerage account just as green as the environment. But remember, investing in stocks, any stocks including a G.E. or McDonald's, involves risk, and past performance is not necessarily indicative of future results.
J. Paul is an educator and researcher who has been investing in stocks and options for more than 25 years. He publishes THE GREEN SHEET, a newsletter on stocks of socially-responsible companies. For further information, e-mail: email@example.com or call (213) 692-1006.
Return to the March/April Issue Index page