The Amateur Investor Ep. 18: Gains and Ethics
One of my favorite songs, and trust me I have a few, is Marvin Gaye’s Trouble Man. The opening always gives me goosebumps, reminding me of a time I long for but never got to live in. But one of the lines that always stuck with me in that song is the part where Gaye talks about the only things he’s sure about; Taxes, Death, and Trouble.
It’s something I turn over in my hands a lot. On some level it’s true, there might be some exceptions that we can bandy about, and I’d likely concede that you were right. Hsuan was once talking about some position he held with a distributing manufacturer of healthcare equipment. He’d opined to me that his position was rising in value, which was due mostly to the rising mortality related to the pandemic, describing it as ‘ghoulish’ or some other word like that.
Frankly, I could see his dilemma, the guy was basically profiting off of death and misery, to put a heavy-handed point on it. But he definitely didn’t set out to do that. Initially, it had likely been a medical play. But realistically, mortality is part of the medical industry, in fact, you could argue most if not all of it is to stave off mortality.
Which brought me to an interesting thought exercise, probably worth doing. As an investor, you might have a set of ethics that you wish to enforce in your portfolio. I know one person who refuses to put any money into oil or fossil fuels, another won’t put any money into defense or the automotive industry. To be honest, that’s fair. But making those determinations and then implementing them can be difficult.
A project I am working on prompted me to do some research on outdoor equipment, gauging the market, and seeing what exists out there. During this, I came upon the realization that there are a few well known outdoor recreation companies, popular in the climbing community, who have a significant arm in defense contracts. Something that a majority of their consumer base is unaware of.
Take Patagonia for example. I like them quite a bit, their unapologetic stance on the environment is one I admire. Their clothing label reads ‘Vote the A-holes out’, a decidedly open statement about participating in the democratic process and fighting climate change. Which is quite cool, not to mention their commitment to sustainability. But it does stand in stark contrast to the company’s cozy relationship with the military. Patagonia and it’s now-defunct military arm, Lost Arrow, have been supplying US special operations with combat uniforms and other apparel under the Protective Combat Uniform program with the United States military, a move that seems largely at odds with their unapologetically political stance and the openly socialist leanings of their founder. It’s something that a bunch of outdoorsy folks I talk to have barely any idea about, and it seems that Patagonia has no intention of making that relationship public knowledge. There are definitely examples of this in Australia. Serco Group PLC, a government services contractor, is also responsible for operating immigration detention centers throughout Australia.
This is all by way of saying that it’s always worth doing a deep dive on the companies you’re planning to buy into. Which is a no-brainer for veteran investors like Hsuan and the other Mockers. But this series is called the Amateur Investor.
I’m working on a pipeline myself for both valuation and doing deep-dive research. It’s hard. I’m finding understanding how that all works is a combination of asking qualitative questions and looking at the numbers but also building up an understanding that was heretofore non-existent.
It’s a bear and the hardest part, at least for me, is that there’s not really a school for it. There’s no structure to it. Which is something I find I thrive in. But I’m learning nevertheless, that the best way to manage these issues (as Hsuan says) is to commit to learning.
Go slow, play small, learn the process.
