Before I began writing for The Motley Fool, which wasn't all that long ago, I'd never invested -- as in "purchased shares of stock" -- outside of the standard foray into mutual funds via various employers. Even after I began writing for the Fool, it took me a while to figure out the direction I wanted my investing to take.
That direction turned out to be socially responsible investing, something that called to me from the start, but that I didn't quite know how to pursue. In the end, evaluating a company based on both corporate social responsibility and long-term performance -- now my primary investing filters -- was just a simple, straightforward blend of the two: I keep a demanding set of metrics for each side of the equation, and companies I invest in must max both sides out.
Most recently, this method led me to invest in what might at first seem the most unlikely of companies: Goldman Sachs (NYSE:GS).
Anyway you slice it
For some companies, corporate social responsibility, or CSR, goes to the very core of the enterprise. Companies like Starbucks (NASDAQ:SBUX) and Whole Foods (NASDAQ: WFM) set as much store by how fairly they pay their suppliers or how ethically they source their meat as by how much money they make.
Other companies go the CSR route by grafting a skin of social responsibility onto their existing corporate bodies. This can be purely for PR purposes, or for purposes more genuine. Either way, for me it doesn't matter: So long as CSR is on a company's radar, and the company is taking positive action as a result, count me in. Goldman clearly falls into the latter category, but as you're about to see, the company is up to real good.
10,000 Small Businesses
This is the name of Goldman's $500 million effort to, as the company puts it on its website, "help small businesses create jobs and economic opportunity by providing them with greater access to business education, financial capital, and business support services." Begun in 2009, 10,000 Small Businesses has three primary components:
- The bank contributes $200 million to local community colleges and business schools to fund scholarships and faculty training. Students get a practical education focusing on skills they can apply immediately, including accounting, marketing, and human-resources management.
- Through a combination of lending and philanthropic support, Goldman contributes $300 million to Community Development Financial Institutions, which will increase the amount of growth capital available to small businesses in underserved communities.
- Entrepreneurs often face challenges finding networking opportunities and expert advice. 10,000 Small Businesses provides these vital services through partnerships with national and local business organizations and professional services firms, including those of Goldman itself.
According to the Small Business Association, over the past 15 years, 64% of net new jobs has been generated by small business. In an economy like the one we're in now, that's a significant number to consider, and all the more reason to applaud Goldman's efforts in this arena.
A great company at a fair price
Not quite as evil as you thought? Okay, now let's look now at a few basic metrics and see how Goldman measures up against its peers as a business and as an investment.
Revenue growth: In its most recent quarter, Goldman grew its revenue by a staggering 133% year over year. JPMorgan Chase (NYSE:JPM) grew its revenue by only 5.2%, while Morgan Stanley's actually contracted by 46.1%. Bank of America's (NYSE:BAC) contracted too, by 25.5%.
Return on equity: Goldman's ROE trailing 12 months was 7.64%, a solid performance on this classic bank-performance metric. JPMorgan came in at an even better 10.12%. Morgan Stanley is tanking here, with an ROE TTM of -0.35%. B of A is at least out of the red on this metric, with an ROE TTM of 2.32%.
Cash-to-debt ratio: It's always good to see more cash than debt on the balance sheet -- ideally at least 1.5 times more.
- With $845 billion in cash and $477 billion in debt, Goldman's C/D is a very healthy 1.77.
- With $890 billion in cash and $710 billion in debt, JPMorgan's C/D is a respectable, if not ideal, 1.25.
- $592 billion in cash and $392 billion in debt gives Morgan Stanley the very respectable C/D of 1.51.
- Finally, $625 billion in cash and $647 billion in debt gives B of A a C/D in need of some help: 0.97.
A happy financial marriage for the new economy
With a P/E of 11, Goldman is also a solid value right now, to boot. All of this goes to show that making money and making a difference don't have to be mutually exclusive, even for the Great Vampire Squid.
In fact, the new economy not only rewards the blending of the two, but practically demands it. Consumers are becoming more and more socially conscious, and they want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference in the mind of the consumer, and the company's bottom line.
Goldman goes above and beyond this minimum standard, however, and backs up its focus on maximizing profits with genuinely good deeds. For me, four shares of Goldman isn't much, but its a start, and one I intend to build on.
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The Motley Fool owns shares of Bank of America Corporation, Whole Foods Market, and JPMorgan Chase. The Fool owns shares of and has written puts on Starbucks. Motley Fool newsletter services have recommended buying shares of Whole Foods Market, Starbucks, and Goldman Sachs. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a singularly delightful disclosure policy.