The Disgusting Methods Factory Farms Use to Dispose of 12,000 Hog's Worth of Waste

For long-term investors, understanding risk is critical to investing success. The factory hog farming industry is an excellent case study of risks hidden beneath strong financial performance.

Jan 27, 2014 at 11:33AM

G

Image courtesy of The Waterkeeper Alliance

Raising hogs is a dirty job. Hogs are massive, they eat a lot, and they produce even more waste. What's perhaps even more disgusting though, is the standard industry practices used to dispose of this waste.

In the slide show below, we'll walk through these practices in pictures. These pictures come from industry watchdog groups The Waterkeeper Alliance and the Neuse Riverkeeper Foundation, who this month jointly with filed a Notice of Intent to sue the farm pictured, the Stilley Swine Feeding Operation in Trenton, N.C., for Clean Water Act violations from their waste disposal methods.

The environmental impact of these industry practices is obvious -- fish kills; pathogens in the rivers, streams, and water table; Pfiesteria and other bacteria infecting wildlife and people; foul odors; and so on. But there is another lesson in this case study pertinent to long-term investors.

It's about understanding a company's operations and its risks

Buffett Georgtown

Invest like Buffett. Image source: Georgetown University

Investing is not abstract. Buying shares of a company is buying ownership in that company. When you invest in a business for the ultra long term, you need to understand the most fundamental nuts and bolts of how that business operates.

Warren Buffett preaches it, and so do we here at The Motley Fool.

Failure to do so can be as ruinous for your investment as hog waste is to local environments. This means digging deep into the financials, it means listening to investor relations conference calls, and reading SEC filings. It also means understanding the basic operations of the business, and recognizing any inherent risks within that operation.

Socially responsible investing

Socially responsible investing is a trend in the investment community where investments are selected based on the company's practices, ethics, product safety, and other factors tied to social impact, in conjunction with traditional considerations like competitive advantage, earnings, growth, and market share. 

Smithfield Foods is the multinational corporation that owns the hogs raised at Stilley Farm.  In September 2013, Smithfield was purchased by Hong Kong-based Shuanghui International Holdings Ltd. for $7.1 billion, making Shuanghui the largest pork producer in the world. 

In its 2013 annual report, Smithfield reported more than $13 billion in sales and more than $500 million in operating profits. Over the past 10 years, the company earned over $4 billion in aggregate operating profits. Financially, the company would likely pass any investor's litmus test.

G

Fish kill near Stilley Farm in Trenton, N.C. Image courtesy of the Waterkeeper Alliance.

But what happens when you take into consideration how this megacorporation operates? Year after year, small town farms raising Smithfield hogs leach or spill noxious waste into the waterways. In 1995, a Smithfield contracted farm leaked over 25 million gallons of hog waste into North Carolina waterways -- the largest spill in history.

Fast forward 19 years and the company's practices have not changed. It's simply a matter of time before another spill meets or exceeds that mark from 1995. 

Investments in businesses you can believe in

This is a huge risk for the company, but it's an even greater risk to the communities surrounding these farms. As an investor, can you justify using your capital to own a company that puts its communities at such risk?

It's a question that should always be asked, but can only be answered by each individual investor. Asking this question is just as fundamental to an investment as understanding cash flow, growth, market share, and valuation. It's part of understanding the big picture, and it's key to successfully investing for the ultra long term.

When you find that perfect company you believe in, own it forever

As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers