Category: Investing

John Cobb and Jennifer Grancio

Spiritual Bankruptcy, by John Cobb, was the focus of several posts, beginning 9/25/22. One Cobb sentence lingers with me: Being religious tends to confirm existing patterns of behavior or even those of ancestors rather than encourage drastic innovation.

I thought of Cobb when I heard Barry Ritholtz interview Jennifer Grancio, CEO of investment company Engine No. 1. Grancio’s company sees sustainability as essential for long-term profitability. It’s just common sense, but some corporations don’t think enough about the long term. It made me wonder if I helped my congregations think enough about the long term.

Cobb and Grancio come from different perspectives to share a common theme, described in Wikipedia’s article about Cobb: A unifying theme of Cobb’s work is his emphasis on ecological interdependence–the idea that every part of the ecosystem is reliant on all the other parts. Cobb has argued that humanity’s most urgent task is to preserve the world on which it lives and depends….

Engine No. 1’s first project was Exxon Mobil, which Grancio and company believed had not addressed long term issues facing a changing oil and gas industry. They successfully elected three new directors to the Exxon board, noting … the changes it has made … including maintaining capital allocation discipline, setting more aggressive GHG emissions reduction targets, and increasing resources for its Low Carbon Solutions business unit.

From “Can Engine No 1 lead Wall Street to ‘beyond investment as usual’?” by Billy
Grider, Climate & Capital Media, April 13, 2022

Sustainability

Sustainability has become a big theme for governments, for businesses and other institutions, and in the investing world. I first heard the word ecology as a college sophomore in 1970. I first heard of nuclear fusion as a potential power source while living in Huntsville, Alabama (1987-1991).

Six years ago, during a political tug of war between supporters of coal-fired power plants and supporters of renewable energy, I studied several electric utilities as potential investments. I found the 2017 State of the Electric Utility Survey Report, which revealed that the electric utility industry had moved full-throttle into natural gas, solar and (to a lesser extent) wind. The operative motif was to secure a wide variety of energy sources to make power. “Sustainability” was the key word in 2017.

Now, fusion as an energy source is moving closer to reality. Coincidentally, today I’ll participate in an online meeting where two friends will present “It’s a Great Time to Be Alive! Recent Rapid Advancements in Science and Technology.” They’ll discuss 14 scientific discoveries and the acceleration of new discoveries and new knowledge. I’ll share more in future posts. It is a great time to be alive!

From “Scientific community buzzing about Lawrence Livermore Lab fusion breakthrough,” by Wilson Walker, CBS San Francisco, December 12, 2022

A gift horse

The old saying, “Don’t look a gift horse in the mouth,” came to mind when I read the Wall Street Journal editorial board’s “Trump Is the Republican Party’s Biggest Loser.”

I’ve criticized the former president early and often, primarily because I’m convinced he has severely damaged the soul of the nation and the state of the world. The Journal’s editorial board sees Trump through the lens of damage done to the GOP, to Wall Street and to the financial markets.

Trump has brought out some of our worst instincts, but he has also awakened some of our best instincts, which were evident in the midterm elections, prompting Robert Kuttner to ask, “Did We Just Save Democracy?

The Journal cites, by chapter and verse, races the GOP coulda, shoulda won if Trump’s ego hadn’t prevented more moderate, common sense candidates from being “primaried” due to his egoic vengeance. The article’s thesis sentence is “Trumpy Republican candidates failed at the ballot box in states that were clearly winnable.”

The Journal’s opinion piece is an important caution to Democrats that their success on Tuesday was not entirely due to their efforts. They had some help from Mar-a-Lago.

From “The meaning and origin of the expression: Don’t look a gift horse in the mouth,” from The Phrase Finder

Processing…stand by

Yesterday’s post included more internecine Methodist data than I usually share, but it was clarifying and therapeutic for me to tell the story and to connect the dots with our larger landscape.

I need time to process what’s going on externally (war in Europe, political craziness in the US, church secessions) and internally (family and friends’ medical situations, new opportunities to give and serve, deciding among some attractive dividend stocks, planning a camping trip). So, for today:

Three question-prompting, yet-to-be-processed notes from a men’s retreat last weekend:

“I heard this love story (of God’s unconditional grace) in a transactional time (when Christianity focused on saying and doing things considered correct by the prevailing culture).”

“We’re all in recovery from things that don’t work anymore.”

“Sanctification isn’t a status to be achieved, but rather the process of being made whole.”

From “Sen. Mike Lee’s tweets against ‘democracy,’ explained,” by Zack Beauchamp, Vox, October 8, 2020

No sad sack

In 1942, George Baker (1915-1975) created the Sad Sack comic strip, beginning with the inaugural edition of Yank, a US Army magazine. Sadly, one definition of sad sack is “an inept blundering person.” I want to embrace my sadness, and the world’s sadness, without becoming a “sad sack.”

This means recognizing sadness is part of life without dwelling on it. Whether chronic or occasional, humans need an escape (or at least a diversion) from sadness. Cartoons can be a diversion. For me, the stock market has been a diversionary hobby and a stress reliever.

I enjoy studying companies, such as WP Carey (NYSE:WPC), a US real estate investment trust (REIT) founded as an alternative investment company by William P. (Bill) Carey (1930-2012). Quarterly earnings calls provide snapshots of our complex, inter-connected planet. CEO Jason Fox described WPC’s recent purchase of 26 Spanish mortuary properties whose tenant, a funeral service provider in Spain and Portugal, is owned by Canada’s Ontario Teachers Pension Plan. Fox said, “It’s a stable business.”

From “George Baker and the Sad Sack,” by R.C. Harvey, The Comics Journal, December 20, 2013

Outside the spotlight

Al Jazeera is a Qatari government-funded Arabic-language news channel based in Doha. As I search the Internet for news about the war in Ukraine, Al Jazeera is among the most timely and most impartial media sources. I’ll let you know if my assessment changes. One reason for their timeliness may be Qatar’s time-zone proximity to Ukraine. Doha is one hour ahead of Kiev.

To speed my news search, AI Jazeera’s “Russia-Ukraine War” newsfeed is one of my browser tabs. A March 17 story, “Russia says it transferred bond payment to avoid default,” included three sentences about the “mechanics” of the transaction:

Another source said JPMorgan, Russia’s correspondent bank, had processed the cash sent by the government and credited it to the paying agent, Citi. It would be checked and then distributed to various bondholders, the source said. Citi declined to comment.

This news tidbit, outside the spotlight of war and human suffering, reveals the relationship of US money-center banks, sovereign states, international corporate finance and investors. Russia is trying to avoid default because bond vigilantes have long memories and Russia’s debt will be growing.

From “Russian Corporate Bond Markets: Braced for Default?” by Peter Zangari, Morgan Stanley Capital Ingteernational (MSCI), March 9, 2022

The market

I haven’t written about the stock market lately. It has been my hobby since February, 1982. The market has given me a window into the world and a doorway to meet friends I might otherwise never know. At various times over these four decades, it has provided a diversion, from things like the war in Ukraine.

My stock universe is small compared to thousands of companies worldwide. When employed, I kept up with 20 or 25 companies. Now, there are 37 dividend-paying companies in my retirement portfolio and a few more on my watchlist. Every day I’m grateful to those who’ve taught me about the market.

We’re in a volatile time as the economy is being weaned off artificially low interest rates, as we struggle with a global pandemic, as we suffer from polarization at home and as a war rages in Europe. The economy and the market have held up amazingly well, but volatility reflects some potential headwinds.

I monitor each stock’s price relative to its 52-week price range. As of Friday, 11 of 37 were at least 20% below their 52-week high. Some might see a buying opportunity; others might see a reason to avoid stocks entirely. I’m not recommending anything, but simply illustrating today’s market volatility.

The number indicates the relationship to its 52-week high: Leggett & Platt (-37%); Artisan Partners (-32%); Intel (-31%); AT&T (-31%); 3M (-29%); Air Products & Chemicals (-27%); Unilever (-27%); BlackRock (-24%); Cummins (-24%); Simon Property Group (-24%); and STORE Capital (-21%).

From “What’s behind the current stock market volatility?” by Amna Nawaz, PBS NewsHour, January 24, 2022 (The link will take you to a transcript of this report and a video of an interview with Dana Patterson)

A look behind the counter

Companies can give us a glimpse of the future. From Walgreens’ 10/4/2021 Investor Day transcript, a peek into future pharmacy from VP John Standley, hastened by Amazon and COVID:

To free up capacity, reduce both our cost to fill existing prescriptions and our incremental cost to fill new prescriptions and also reduce inventory, we are building a nationwide network of micro fulfillment sites using cutting-edge automation technology from iA, a company we recently made a majority investment in, that will leverage our existing AmerisourceBergen distribution network to efficiently fill prescriptions and quickly get them to our pharmacies.

Today, we have 2 micro fulfillment centers … serving over 1,000 pharmacies in the Phoenix and Dallas areas. We’ll have an additional 9 centers … by the end of fiscal year ’22, bringing the number of pharmacies served to around 3,900. And by 2024, we will have 22 facilities serving over 8,500 pharmacies. … we are also expanding our centralized services capabilities to free up even more time for our pharmacy teams.

Further, we are building a new pharmacy dispensing platform that will make it easier for our pharmacists to fill prescriptions, manage inventory and provide additional clinical interactions. Components of the new dispensing platform have already begun rolling out …. These investments … provide us the capacity and clinical tools we need to grow our prescription business as well as provide additional health care services.”

From “Walgreens plans 9 more micro-fulfillment centers for prescription delivery,” by Edwin Lopez, HealthcareDive, July 7, 2021

Delivering positive energy

When I study companies I run across some engaging people, such as Wes Edens, 60, an investor with a long history of money management with Lehman Brothers and BlackRock prior to founding Fortress Investment Group in 1998. He may be best known as co-owner of the NBA’s Milwaukee Bucks.

In 2014, Edens founded New Fortress Energy, which is “Powered by Positive Energy.” NFE’s mission statement is “We want to light the world,” driven by an awareness that “Billions of people around the planet lack access to affordable power. Electricity should not be a luxury good.” NFE is a liquefied natural gas (LNG) company.

They build LNG delivery systems both small and large in places like Jamaica and Puerto Rico. They recently launched new ventures in Sri Lanka and Brazil.

I’m just beginning my study. It’s a unique utility with a low dividend yield and a low B+ S&P credit rating, but I’m intrigued by Eden’s “change the world” spirit. I think solar is the key to our energy future, but Eden sees an important role for LNG and hydrogen. It’s a fascinating human interest, environmental and sustainability story,

From “Zeroing in on zero-emission hydrogen,” Q&A with Wes Edens, from the NFE website

Debt matters

Bloomberg’s Tom Keene is an economist disguised as a broadcaster. He understands sovereign debt, which he calls “full faith and credit,” a term that reminds us of the promise behind a nation’s debt.

A late night Monopoly lesson from my dad was a debt signal. He was ready to call it quits when he began to mortgage his property. He received a little cash but he received less rental income. It turned the tide my way, which made me happy. It hastened the end of the game, which made him happy.

In a September 30 article, financial analyst Ross Hendricks wrote a helpful article sub-titled, “The speculative excess in today’s market shares no precedent.” Debt matters, whether it’s an over-leveraged investor or a nation that can “print money” to pay for its prior expenditures.

As we go through an unnecessarily juvenile season of political posturing over our national government’s financial integrity, I refuse to think of it as a “good guys” vs “bad guys” polarization, but rather a group of “blind guys” trying to repair a transmission while refusing to help each other.

From “The Most Dangerous Stock Market Ever,” by Ross Hendricks, The Ross Report, September 30, 2021 (The article, along with 800+ comments, is available at Seeking Alpha.)