(Note: my next podcast is August 2.) Kellogg has the most successful vegie burger, pressure begins for IPO. More ESG stock, fund, and portfolio tips. Abandon GE, buy Schneider Electric, says Tim Nash in his stock challenge. Pot companies plan to adopt ESG as they strive to be seen as responsible, ethical, and sustainable investments.
PODCAST: Kellogg’s ‘Beyond Meat,’ ESG Stock Tips, Ethical Pot Companies
Transcript & Links July 5, 2019
Hello, Ron Robins here. Welcome to my podcast Ethical & Sustainable Investing News to Profit By! for July 5, 2019—presented by Investing for the Soul. investingforthesoul.com is your site for vital global ethical and sustainable investing information and resources. Please note that due to holidays my next podcast will be on August 2.
Now to this podcast. And, Google any terms that are unfamiliar to you.
Also, you can find a full transcript, live links and bonus material to this podcast at this edition’s podcast page located at investingforthesoul.com/podcasts
Hey, about the continuing saga of Beyond Meat. Its stock as of this writing is still holding well over $150 s share.
Well, it seems that Brett Arends writing in MarketWatch has found that Kellogg has its own successful Beyond Meat competitor under the guise of its subsidiary MorningStar Farms — and it’s going under the radar of everyone!
In an article titled, Kellogg is sitting on a ‘fake meat’ gold mine bigger than Beyond Meat, Brett argues that Kellogg, whose stock price has been struggling for years, should take MorningStar Farms public and might well become even more valuable than Beyond Meat.
Quoting Brett, he says, that, “Kellogg already owns the largest single ‘fake meat’ operation in the country in MorningStar Farms, a brand that has been around since the 1970s. [and he says] Where’s its IPO?”
Continuing, Brett states, that, “I tried MorningStar’s ‘Grillers’ vegetarian burgers not long ago, on the recommendation of some friends. Frankly, I found them way better than Beyond Meat’s ‘Beyond Burgers’ and not obviously worse than the so-called ‘Impossible Burger’ that people are raving about. Close quote.
Brett says that Kellogg won’t break out the annual sales figures for MorningStar Farms—though he believes they could be around $450 million and that compares with $290 million for Beyond Meat’s 2019 sales estimate!
So, will Kellogg spin-off MorningStar Farms and do an IPO? Who knows but Sustainalytics gives Kellogg an ESG rating of 65—putting it in the 81st percentile of its peers and Reuters says analysts following the stock presently rate it as a hold. So, something you might consider.
Barron’s the US investment daily paper recently published a piece by Karen Hube titled, How to Build Your Own ESG Portfolio. She says all the right things, such as the following, quoting her, “By putting your savings in funds that assess how a company is addressing (or worsening) environmental, social, and governance, or ESG, factors, you hitch your investments to good corporate citizens, and may earn above-average returns. But turning the concept into a practical investment portfolio without compromising on investing mandates such as diversification and due diligence comes with a unique set of challenges.” End quote
So, some great points are made in her article, but her portfolio appears overly diversified to me. Statistically, having more than fifteen stocks in diversified industries across regions will give you very little extra statistical benefit. Also, no-doubt it’ll include sectors and companies that won’t please you!
Along similar lines, John Eade of Argus Research Group published their sustainable stock recommendations in a post, An Argus Research Portfolio for Sustainable Impact Stocks which appeared in Money Show. John likes: Alphabet Inc. (GOOGL: OQ), Ecolab Inc. (ECL: NYSE), Johnson & Johnson (JNJ: NYSE), JPMorgan Chase & Co. (JPM: NYSE), McDonald’s Corp. (MCD: NYSE), Microsoft Corp. (MSFT: N), Norfolk Southern Corp. (NSC: NYSE) and a few more that you can see by clicking the link in the transcript for this podcast.
Again, if you have or are interested in creating a portfolio of profitable individual stocks that reflect your values, learn how to do it properly and systematically in my one-hour DIY Ethical-Sustainable Investing Pays Tutorial. Take a few seconds to check it out! Go to investingforthesoul.com/podcasts and look down the right-hand sidebar.
In speaking of portfolio diversification, heavy industry is not a sector that as an ethical and sustainable investor you might consider. Nonetheless, you can’t escape the necessity for it in our society and it can have a place in your portfolio too. So, in Tim Nash’s sustainable stock showdown pulls plug on GE, he compares General Electric (GE: NYSE) with Schneider Electric (SGBSY: OTC).
GE has been in the doldrums for several years. Tim says about GE, that, “GE was a great investment throughout the 20th century, but lacking a clear forward-looking strategy to transition into a low-carbon future, it’s no wonder that sustainable investors are turning out the lights on GE shares.” End quote
Concerning Schneider Electric, Tim says, that, “Schneider Electric is a French energy management company making hardware and software that helps companies improve their energy efficiency… Schneider Electric at #60 on the 2019 Corporate Knights Global 100 Most Sustainable Corporations in the World list, and #13 on the 2019 Corporate Knights and As You Sow Clean200 list.”
Finally, he says, “If you want to keep the lights on sustainably in the 2000s, forget GE. Schneider Electric is a better investment.”
Yet another new low-cost ESG ETF has been launched. It’s the Xtrackers S&P 500 ESG ETF (NYSE: SNPE). What’s special about this ESG ETF is that it tracks the new S&P 500 ESG Index. According to Todd Shriber at Benzinga in a post, Another Cheap ESG ETF is Here, Todd writes, that, the “S&P Dow Jones launched the index earlier this year and its approach to ESG investing is traditional in that it excludes tobacco companies, civilian firearms manufacturers and companies with low scores based on the United Nations Global Compact for responsible business…
Continuing the quote, Todd says that, “The new SNPE allocates over 27% of its weight to the technology sector and a combined 28.23% of its weight to the health care and consumer discretionary sectors. SNPE is home to 319 stocks. The financial services and industrial sectors combine for over 20% of the fund’s weight.”
Now earlier I brought up the subject of over-diversification and here I’m concerned that like most other general ESG ETFs they tend to under diversify into a few key sectors—and so, for instance, when tech, health care, and financials do well, they thrive. Since these sectors have done so well in the past decade, portfolios that are heavily weighted in those sectors have generally outperformed.
However, with trade frictions, anti-monopolistic sentiments and governments potentially further regulating health care costs and privacy concerns coming to the fore, it’s possible that stock market leadership might rotate to other market sectors.
From another perspective that also relates in a way to diversification, is a protestation by James Gard in a Morningstar UK article. In it, he argues to be a little ‘looser’ in not being too strict in only including top ESG rated companies in your portfolio. His article is titled, Should ESG Funds Buy “Bad” Companies? James makes a point that, quote, “Investors who shun such firms may miss out if these efforts pay off in the long-term.”
James further quotes Jon Hale, also of Morningstar, as follows, “Wouldn’t another investor come along to take the place of the ‘responsible’ investor? And if enough investors shun a company’s stock, it could become undervalued and end up outperforming for those who don’t have any problem investing in it.” And by the time that happens, that poor performing ESG stock could become a leading ESG stock with great stock price gains that you would’ve missed out on. So that’s the argument for loosening your ESG stock screening.
Incidentally, terrific price gains have been made with pot stocks in recent years. But can they be worthy investments for ethical and sustainable investors? That’s a complicated question. Besides the personal values issues for you, you might’ve wondered if pot companies can do well with ESG issues?
Well, the pot industry is aiming to create its own ESG standards. Kristine Owram, writing in a Bloomberg article titled, Pot Firms Seek to Transition From Sin Stocks to Ethical Darlings, says, that, and I quote, “A group of 45 companies operating in the cannabis industry has crafted a set of standards that they hope could one day transform them from sin stocks into ESG darlings.”
This will be fascinating to watch! Can pot companies be sold as health producing ESG focused entities to institutional investors? For a great review of the pot industry from an ESG perspective see the Sustainalytics post and report, ESG Risks of Cannabis Cultivation: Energy, Emissions and Pesticides.
So, these are my top news stories and tips for ethical and sustainable investors over the past two weeks.
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Come again! And as I mentioned, my next podcast is scheduled for August 2. Yes, I’m taking a break. Talk to you then. Bye for now.