Investing in the Holiday Spirit

"How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?"
--Pope Francis

Capitalism has gained a bad reputation. Pope Francis, Time magazine's Person of the Year, recently made this criticism, which is particularly pointed during the holiday season, which is defined by love, giving, and hope for big changes in the year to come.

Here's an idea for a resolution: As investors, let's work to repair capitalism's reputation by investing in companies that seek to make the world a better place -- not a more inequitable one.

Hungry for empathy
Increasing numbers of entrepreneurs and business managements are rejecting decades of dog-eat-dog business and investing theory. These enlightened managements embrace furthering the good of all stakeholders, as opposed to neglecting all but one (shareholders). After all, employees, communities, customers, and the environment are also stakeholders in some way or another.

To run businesses in this way, leaders have to possess a sort of empathy that's too often lacking in modern leadership. Putting ourselves in other people's shoes reminds us of the hardships of others and helps us learn how we can help.

In September, Panera (NASDAQ: PNRA  ) founder and CEO Ron Shaich did just that. He gave himself a $4.50 per-day food allowance for one week -- the amount of money allotted under the Supplemental Nutrition Assistance Program. According to Shaich:

I was hungry last week -- laser-focused on how much food was left in the fridge and how many dollars were left in my wallet. I was scared about eating portions that were too big, and wasn't sure what to do if my food ran out. I canceled two scheduled dinners, knowing they were way beyond my budget.

Shaich's experiment wasn't a short-term impulse. Hunger awareness has always been part of Panera's business, and its history includes initiatives like donating daily unsold bread to local food banks.

A corporation with a conscience
There's a new kid in town among positive business leaders. Its SEC prospectus discusses its "commitment to Conscious Capitalism."

The Container Store's  (NYSE: TCS  ) share price doubled on its first day of trading on Nov. 1. Although highflying IPOs are often dangerous for investors, The Container Store has some attributes that make it far more compelling than your average IPO.

Chairman and CEO Kip Tindell's shareholder letter in The Container Store's IPO prospectus outlines the company's philosophy:

One of our greatest hopes is that the practice of simultaneously taking care of everyone connected to a business, operating from a purpose beyond profits and leading with consciousness -- what we along with other companies, thought leaders and academics call Conscious Capitalism -- becomes the preferred and most accepted way of doing business. It will prove that the economic imperatives of corporate success aren't incompatible with doing the right things. It's not a zero-sum game. No one has to lose for the other person to win. You can make decisions based on love and succeed.

In just one example of the kind of competitive advantage that makes such companies different, The Container Store's employee turnover rate is about 10% annually, compared to an average of more than 100% across the retail industry.

Does this mean investors should jump into The Container Store right now? Not necessarily. It's a hot IPO, and as of now, the business isn't profitable. Still, it deserves to be on the watch list, given its foundation -- a positive one that likely has a great future that many of us will invest in, even after today's fair-weather-friend IPO traders are long gone.

The positive paradigm
Anyone who's interested in this business philosophy can read Conscious Capitalism: Liberating the Heroic Spirit of Business, written by Raj Sisodia and Whole Foods Market  (NASDAQ: WFM  ) founder and CEO John Mackey. Sisodia also wrote Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, which relates to similarly positive and well-positioned companies.

Mackey has long been a proponent of "Conscious Capitalism." This stakeholder-friendly approach highlights how capitalism can be good -- incredibly so.

Corporate managements that adhere to this philosophy operate with empathy and understanding. They recognize the web of positive interrelationships between all stakeholders, boosting prosperity for all.

For investors who think investing like this isn't a winning strategy, take the "Firms of Endearment" list that Sisodia compiled. Says Sisodia: "We put [the companies] through a stringent set of screening criteria to arrive at a final set of 28 Firms of Endearment: companies truly loved by all who come in contact with them -- customers, employees, suppliers, environmentalists, the community, even governments!"

From 1996 through 2011, these "Firms of Endearment" provided a 21% cumulative return, outperforming the S&P 500 10.5-to-1. Obviously, corporate managements and strategies don't have to be brutal to make successful companies and deliver excellent investing returns.

The holiday spirit
The market's day-to-day ups and downs really shouldn't be considered all that newsworthy. For those of us who are holding stocks of the greatest companies for the long term, it's simply noise.

When holding stocks whose managements take a conscious approach, shareholders enjoy an added benefit. Investing in companies that do good by all their stakeholders exemplifies the holiday spirit. That's the kind of spirit that should last all year long, in investing and in life.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (9) | Recommend This Article (18)

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  • Report this Comment On December 24, 2013, at 1:05 PM, gskinner75006 wrote:

    I think we have forgotten what "Supplemental" really means. We have also forgotten what charity really is about. Most people and companies only seem to give if they can get something in return. I give to charities of my choice on a regular basis and I have never accepted a receipt for tax purposes. I give because it's what I want to do. The only exception was at my last company because you either gave to United Way or else.

  • Report this Comment On December 24, 2013, at 7:00 PM, SkepikI wrote:

    Until this article, I had come to think of you as Alyce in Wonderland. Logic just convoluted enough to make a weird kind of sense. Particularly after the wildly popular minimum wage item recently....

    This is the very first time I've seen you back up any investment myths proposed with checkable, clear and interesting facts. I'm not saying you never do this, only that the articles from you that I bothered to read did not. This interested me because of my regard for both Panera and The Container Store as a customer.

    The investing metrics are not very compelling at least for my situation. But its somewhat tempting as a flyer if for no other reason than to seriously test your theory.

    I can't say the same for Whole Foods. They have lots of competition in my area from grocers who treat their employees as well or better, and their prices are much lower than Whole Paycheck as we call them here. While I certainly believe that given those prices the Tiffany and Co of grocers OUGHT to treat their employees great, I dont see that ordinary people and the frugal can afford to shop there. That said, they obviously succeed in their niche, and there will always be a place for the Tiffany & cos of the world and I would expect their investors to do well. I just don't see them in the same deserving of investment support as some of your other suggestions.

  • Report this Comment On December 25, 2013, at 11:35 PM, todamo13 wrote:

    Another great, insightful article, Alyce. Thank you for trying to get people to see the big picture.

  • Report this Comment On December 26, 2013, at 7:19 AM, Mathman6577 wrote:

    The bigger picture and cause for concern is the relationship between the government and certain businesses (i.e. "crony capitalism"). Most people lose when the country goes down this path.

    Also, companies (really meaning their CEO's, etc.) need to stay out of politics. An example is the CEO of COST supporting a hike in the minimum wage (when the average wage at his company is almost 3x the min. wage now).

  • Report this Comment On December 26, 2013, at 12:55 PM, HoosierRube wrote:

    Why the cherry picking of companies here?

    I've got $1 that says IBM, GE, Lockheed and every other Fortune 500 company has invested more money back into the communities they do business in than any of the companies mentioned here.

    I find the lack of research to be self-serving and self congratulatory.

  • Report this Comment On December 27, 2013, at 3:19 PM, SkepikI wrote:

    Here's an idea Alyce. Just take ONE Corporate black hat or even a middle of the road mainstream enterprise you suspect to be less than sterling. Then go top to bottom, inside out and outside in analyzing their ENTIRE contribution to keeping their employees and customers at a "liveable level" Not just wages. Prices. Charitable contributions. Foundations, Funds, promotions over minimum wage, the whole enchilada. Take somebody you might not ordinarily think of as "Trendy good" like say Home Depot. Then invite commentary and criticism from all comers to show you what you missed.... my bet is you would be taken aback.

    My bet is you also miss some interesting elements that the "bad capitalists" just choose to do in a different way than your approved methods....

  • Report this Comment On December 28, 2013, at 5:38 PM, Mathman6577 wrote:

    @Skeplkl: Good comment. $WMT has actually supported living wage and min. wage increase in the past -- until the unions and left-wing pols started bashing them.

  • Report this Comment On January 02, 2014, at 2:31 PM, TMFLomax wrote:

    Skepikl,

    I might have nearly gotten to your point with pieces like this one:

    http://www.fool.com/investing/general/2013/10/08/how-corpora...

    It mentions that, say, WMT has been big on environmental initiatives; one might not suspect Lockheed Martin, but it has a lot of interesting initiatives along these lines as well.

    I have been rethinking Monsanto a bit; I'm not a fan and will likely never invest in that company, but I am recognizing some interesting things right now, such as pointing out its relationship to climate change (it recently bought The Climate Corporation) as well as a valid point many people make about feeding the world.

    These are complexities and it is good to discuss them. I should do more examinations because you're right, a lot of companies are contributing to a lot of positive things -- however, I think I've heard it described as sort of "gluing something on" and not "making it part of the business," but at maybe we shouldn't ignore that kind of complexity.

    Best,

    Alyce

  • Report this Comment On March 12, 2014, at 5:58 AM, thidmark wrote:

    A person would starve on $4.50 a day at Whole Foods

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