Saturday, November 23, 2013

The Best Companies to Work for 2013

There is an organization named Glassdoor that offers information on jobs and career in a unique way. As they describe themselves, Glassdoor "offers the world an inside look at jobs and companies. What sets us apart is our "employee generated content" – anonymous salaries, company reviews, interview questions, and more – all posted by employees, job seekers, and sometimes the companies themselves."

Think about it...Who knows the companies better than the employees who actually work there? While other surveys rely on companies to self-nominate themselves, Glassdoor's results probably can be trusted given that most of the data is from employees. The organization has been conducting this survey for five years and publishes a list of the top 50 places to work each year.

So what does a job information site have to do with Investing, especially SRI ? Well, a lot. Several studies on the performance of socially responsible investments indicate that while SRI is not guaranteed to beat the market, firms which specialize in the "S" of ESG as a whole outperform the market. Further, like the saying "Charity begins at home", we believe if a company can't take care of its own people, it certainly won't be able to help others!

The ranking of the top companies list is quantified by taking an average of all surveyed respondents' ratings after they answered an 18-question survey.  The survey asks employees if they trust their CEO, work-life balance, company culture, job mobility and compensation.  The table below is from another of Glassdoor's surveys, this particular one is on Employee Confidence. It is shown here to demonstrate factors that are behind the rankings.

Facebook ("FB") was the Number 1 rated company two years counting with an overall company rating of 4.7 out of 5.0. In an interesting twist, employees got to "like" Facebook's CEO in the survey.  In fact, a huge 99% of employees said they trust Mr. Zuckerberg, up 14% from the previous year. In receiving the award, Lori Goler, Facebook’s vice president of people and recruiting stated, "We strive to make Facebook a place where everyone is able to have an impact doing what they love.  Receiving this award is a testament to the culture of builders we’ve worked hard to create.”

What's even more fascinating is that the survey occurred during the time of Facebook's failed initial public offering (many employees receive stock-based compensation so you would think they were disappointed). The chart below is FB's share price during the survey period (Nov'11 to Nov'12) when its shares hit their all-time low of $17.55.  They are now trading well over twice that price!

Is Facebook really a socially responsible company?
Using the common definition of ESG, the flat answer is "No." However, we expect the company will be on a strong uptrend in its ESG efforts given that other top-rated surveyed companies (i.e, Bain & Co., Boston Consulting Group, Gartner, REI, Trader Joe's, etc) usually rank highly in ESG.  Remember, Facebook is a young company. Only recently, has it begun to aggressively monetizing its 1.1Bn customer base. Despite this $-focus, its fearless leader has already jumped to number 2 ranking on the Philanthropy 50, behind only Warren Buffet. CSRHub, which aggregates ESG ratings from several sources, rates Facebook "53" (higher the better) which is equal to the average rating of its universe. Facebook rated particularly weak in Governance, probably due to Zuckerberg's control of the company via "supershares" and multiple-hat role (CEO, Chairman) at the company.

Overall, we believe using the Best Companies to Work For list is a good investment criteria.  This list should be used along with other investment criteria such as stock screening and fundamental analysis. While Facebook is certainly no Starbuck's it appears to be a company that will increasingly focus its efforts on increasing value to all stakeholders including socially responsible investors.

Disclosure: The author has held investment positions in Facebook and Starbuck's and may purchase and/or increase these investment positions.

Monday, November 18, 2013

Should SodaStream look East ?

In a recent Wall Street Journal article link the paper quotes Coke CEO Kent's plans to spend $4Bn over the next three years to expand bottling plants, marketing, etc. in China.

For now, SodaStream's concentrating in the United States (i.e., the Americas).  And for good reason.  Whether you call it a secular trend, or just a fad, no one can deny that SODA's Americas' growth is fantastic.

Source: SodaStream, Socially Responsible Investing

So then, everything must be Hunky-Dory at SodaStream.  Or No ?

SodaStream shares lost their fizz after they beat the Street's estimates for 2Q'11.  Which makes me ponder what would have happened if they DIDN'T beat the Street!  CEO Daniel Birnbaum later (8/18/11) appeared at a mini roadshow speaking with Jim Cramer, but the damage was already done (see stock chart).

Source: GoogleFinance
Several analysts and Seeking Alpha members were disappointed that SodaStream didn't raise its 2011 guidance.  After all, at this rate, revenue growth would implicitly be expected to slow down to c.20%.

The lack of color in this outlook picture is surely reason for pause.  So, what's going on in Western Europe ?  Well, according to Birnbaum, everything's Kosher.  He basically said:
  • Indicators of Americas and Europe are fine
  • In fact, Europe will benefit if its economy slows, as it's a value proposition

Whoa, whoa, whoa.. REALLY...?
  • To me, SodaStream's still a consumer discretionary product, in fact, Birnbaum doesn't want to market it as a value-product.  The deal is, you can't say that it's a higher-valued/differentiated item (see company presentations) then later say it'll sell well because it has a strong value proposition.  In fact, in my earlier analysis, I proved that SodaStream does not significantly reduce soda costs.  See SA article Should SodaStream go Single?
  • More evidence that weakness in Europe will effect SodaStream's business comes from Linda Montag and Yasmina Serghii-Douvin of Moody's.  They expect European soda demand to remain lethargic, especially in the ever-expanding countries with troubles (e.g., Greece, Spain, Portugal, Italy).  As proof, they give the example of Greece's 2010 slowdown (one of the first) which significantly reduced soda volumes at Coca-Cola Hellenic Bottling Co.
  • Recall that SODA's Western European revenues declined in 2009 attributed to significant business and inventory management problems at one of its Nordic distributors.  A portion of the problems were directly related to the Financial Crises.
  • SODA would also be hurt if the EURO, which has held up remarkably well in the $1.40/EUR area, declines.

Despite all the talk about the hot Americas/U.S. business, the fact is that much of SodaStream's revenues still come out of Western Europe (see chart below).

Source: SodaStream, Socially Responsible Investing

Also note that given the geographic proximity and close economic ties, Eastern Europe will undoubtedly be affected by a slowdown in Western Europe.  So where does that leave SodaStream?

So then, maybe SodaStream should be looking East !

Going back to my opening comments, maybe, just maybe, SodaStream should focus its energies on the East.  Wait, wait, you say that "SODA's already in Asia."  And to that I respond, not really....

Yes, the company is doing a small amount of business in Asia-Pacific (see above chart).  However, drilling-down it appears nearly all of it is actually in Australia and New Zealand.  Should we really call those Anglo-Saxons examples of what it means to be Asian?

Instead, I suggest SodaStream delve into China and Japan.  Japan's consumer-profile is somewhat similar to Europe and the U.S., and we all know they love robots and other gadgets.  In fact, management did mention their intention to enter the Japanese market by this year's end.   Also, I strongly believe that SODA should enter the Chinese market, especially since Coke and Pepsi are already educating its consumers.  Besides, the trajectory of soda consumption is salivating.  See chart courtesy the WSJ.

Of course, entering China and Japan has its own share of problems.  Birnbaum, cited difficulties with language, regulations and advertising contracts in Japan.

In China, the largest issue will be protection of intellectual property rights and lack of full control of local entities.  Remember...those CO2 carbonators SodaStream "sells" to you actually come with a license agreement, which effectively empowers SodaStream to collect 70-80% gross margins.

I welcome constructive comments and criticisms.  So long as we're listening with open minds, I believe we will all benefit from them.

Disclosure:  the author is long SODA

Saturday, November 16, 2013

SRI Top Ten Must-Read Books

Here at Socially Responsible Investing, we put together a list of our top 10 books in the field.  Please take a look and feel free to offer your view on the list.  We saved our favorite at #10.  Also, over the next few months, we will be posting book reviews on each of these books.  Happy reading & investing!


  1. Investing for Good - Making Money While Being Socially Responsible (Step-by-step Guide for Doing Well Financially While Doing Good Socially), Peter Kinder, Steven D. Lydenberg, Amy L. Domin
  2. An Investor's Guide to Ethical & Socially Responsible Investment Funds , John Hancock
  3. The Debate over Corporate Social Responsibility, Steven K. May
  4. Corporate Social Responsibility: Doing the Most Good for Your Company-Your Cause, Philip Kotler and Nancy Lee Kotler and Lee
  5. Green to Gold: How Smart Companies Use Environmental StrategyDaniel C. Esty and Andrew S. Winston Esty
  6. The Complete Idiot's Guide to Socially Responsible Investing, Ken Little
  7. Beyond The Bottom Line: Putting Social Responsibility To Work For Your Business, Joel Makower
  8. The SRI Advantage: Why Socially Responsible Investing Has Outperformed FinanciallyPeter Camejo
  9. The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success -- and How You Can Too, Andrew W.Savitz
  10. Socially Responsible Investing: Making a Difference and Making Money, Amy Domini                                                                        
                    The Bible of SRI, please see our book review for details

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