‘m not in the “market”, I got “cured” in 1988. But when I was, I only got into stocks that I felt good about: Caterpillar, Bell Helicopter, General Telephone.
Wal-Mart got a lot of attention this holiday shopping season, but not in the way they were hoping. Even as they made headlines for opening on Thanksgiving Day, a photo of bins at a Wal-Mart store collecting canned goods from employees to be given to other impoverished employees called attention to the low (some would say, “starvation”) wages Wal-Mart pays.
Add to this some high-profile Twitter skirmishes and Internet memes implying that taxpayers are footing the bill for Wal-Mart’s low wages, and the world’s largest retailer looked less like Santa and more like Scrooge.
In light of all this, should you dump your Wal-Mart shares? And what if you want exposure to the retail sector, but with a clear conscience? Does any other company stack up?
Check emotion at the door
There’s no shortage of businesses that make their money in ways that might turn an investor’s stomach. Altria (formerly Philip Morris) is just one example. In some cases, these stocks underperform the market, but often they produce outstanding returns.
It just goes to show that one’s moral compass isn’t the best tool in an investor’s arsenal. So should you avoid buying shares of a company you detest?
Well, ultimately that’s up to you, but I’m a big proponent of the theory that an investor should be proud to own the businesses he or she holds stock in. And you really can’t be proud of a business you find icky.
Ideally, an investor keeps emotion out of picking stocks to avoid making emotional, as opposed to rational, decisions about trading. And if every time you look at a stock, a shiver runs up your spine, you’re having an emotional reaction. Which means you may end up selling the stock too soon or ignoring a gut instinct to sell by misidentifying it as your usual aversion to the stock. Bottom line: if a company makes you sick, stay far away from its products and its stock.
Who measures up
Okay, but what about Wal-Mart? There’s no question it’s an investment that’s done pretty well over the past decade, especially during the recession–but as you can see, lately it’s not only been underpaying its employees, but underperforming the market too:
Buy Costco and Target instead.