Battlepanda: Should I buy Halliburton Stock?


Always trying to figure things out with the minimum of bullshit and the maximum of belligerence.

Thursday, December 08, 2005

Should I buy Halliburton Stock?

The always-interesting Daniel Gross suggests an interesting investment strategy in his Slate column: Find a company you really hate, then buy its stock. The rational is simple -- stocks of companies with bad reputations are chronically undervalued. This makes them better buys in the face of a down market -- there is less froth in their price to evaporate.

For the best-loved companies don't always make good investments. Look at the companies topping the reputation chart. The top 10 are Johnson & Johnson, Coca-Cola, Google, UPS, 3M, Sony, Microsoft, General Mills, FedEx, and Intel. Of those, only Google, Federal Express, and Intel have outperformed the S&P 500 over the past three years. In the past year, only Google, Intel, and Johnson & Johnson have outperformed the S&P 500. Now look at the bottom of the reputation list. Of the six publicly traded companies in the last 11—Altria, Martha Stewart, Exxon Mobil, Royal Dutch/Shell, Tyco, and Halliburton—five have outperformed the S&P 500 over the past three years, and four have outperformed the index over the past year.

So, would I, as a liberal, refuse to hold Halliburton stock on principle? Goodness no. In this respect, at least, I am a free-market cynic. If a liberal pass on a good stock because he doesn't like what the company does on an ethical level, it hurts the liberal, not the company. Somebody else is sure to come along and snap the said stock up. Sure, if enough liberals do it, we'd be a big enough block as to slightly depress the value of the "sin" stocks. But would that result be worth what amounts to a sizable and continual transfer in wealth from liberals to people who just don't care? There are cheaper and more effective ways of changing the world.

Now, consumer boycotts are a different matter. Refusing to buy products affects the company's bottom line in a much more direct way, and consumer boycotts (and conversely rewarding "good" companies with more business) can have surprisingly big effects in corporate behavior. This is especially true when the boycott is organized and vociferous and targetted. Unfortunately, it seems that the other side knows how to do this better than we do.