Our reader Howard P asks our thoughts on ethical investing. In particular in the student admission scandal now playing out.
As some of you know the founder and CEO of Hercules Capital (NASDAQ:HTCG) has been charged in the university admission scandal. He has now stepped down as CEO and Chair. The business development company has a couple of baby bond issues outstanding.
As everyone knows we don’t do politics on this site–for obvious reasons. Additionally I don’t think that generally doing much about ethics is really what this site is about. But I will give my opinion–and others can chime in with comments if they desire.
We invest to try to make our 7% annually and we do not take into consideration any individual “bad actors” within a company. I distrust everyone equally. I have commented before that with business development companies, for instance, their assets are mostly “trust me” assets–level 3–can’t observe the values directly and you have to “trust” management to do their job, but I am under no illusion that all their numbers are correct.
We have seen bad actors in many companies. Recently CHS had a bad actor which caused a $190 million write down–I bought one of the preferred issues after this was known.
We have seen plenty of bad actors in Wells Fargo. I have a bigger concern with Wells Fargo as there seems to be a “culture” that permeates the company as a whole.
I suppose someone could brand tobacco and liquor companies as a whole as bad actors. We don’t invest in them, but only because they have nothing available to help meet our needs.
The one area I don’t invest in and wouldn’t invest in is the marijuana business. I would be a hypocrite if I invested here because of my own position on this topic in Minnesota (Minnesota just shot down any chance of legalization of marijuana for this year). I am torn on this subject–I can’t reconcile the anti-smoking campaign over the last 50 years with legalizing the next “smoking”. On the other hand filling jails with folks because of marijuana possession is kind of silly.