Invest-ability bulletin 10/11/21: Sleaze Nation

Dirty business is everywhere, although perhaps not where you’d expect it

The good thing about not writing an email every day is that I find that I spend less time reading the news, and thus avoiding the anger and irritation that generally accompanies such a pursuit. The downside is that the aforementioned news filters into my consciousness regardless, but the lack of writing gives me no safety valve through which to vent my frustration with current affairs – which often translates into a bad back and is why I’ve been spending a lot of time on the floor this week. It’s good to be able to let off steam, and nice to have someone to listen.

For the last couple of weeks most of the news seems to have revolved around a parliamentary sleaze scandal the likes of which haven’t been seen since Jonathan Aitken roamed Whitehall. New revelations over which snouts are in which trough are emerging on a seemingly daily basis. Today is the turn of a number of MPs who’ve been paid in one way or another by the Betting and Gaming Council to lobby the government on its behalf, either by writing sponsored articles for Conservative Home website espousing the wondrous economic contribution of the gambling industry, orin return for a mere £24k a year warning in Parliament against tougher gambling rules else risking the rise of a new set of Peaky Blinders.

Any of you that used to read me at the Investors’ Chronicle will know that this is an industry that has my personal ESG red line straight through it, and I can’t wait for them all to be snapped up by American firms so I don’t have to worry about who’s sponsoring my football team any more. It also demonstrates much that I believe is wrong with current ESG frameworks. Lots of gambling companies appear in the FTSE4Good ethical index and in the portfolios of ethical funds, on the basis that they are making efforts to make gambling safer. I’d exclude them entirely on the basis that gambling offers very little benefit to society at all apart from the dubious boast that they are preventing a wave of UK mafiosi. Bet365 boss Denise Coates CBE is richer than the Queen only because most of her customers are a bit poorer after dealing with her. 400,000 problem gamblers in the UK aren’t, it seems, enough of a problem to get in the way of New Year honours. 

Of course, not everyone will agree with me, which is fine because, as I’ve argued before, everyone is entitled to draw their own red lines wherever they want – I’d happily hold a tobacco share if I thought it was a good business, if only because it would be an incredible feat of cognitive dissonance to shun investing in them whilst sitting here at my computer puffing away like Hunter S Thompson. Some people might not like investing in arms companies, but here we get into even murkier territory – do I not buy shares in Rolls-Royce because it helps build nuclear submarines, or do I buy them because its expertise in building nuclear submarines now means it could develop a new generation of small nuclear reactors that could help solve the UK’s energy crisis? US soul singer Edwin Starr once asked what war was good for – he concluded “nothing”, but looking at the technological world we live in, much of which can trace its roots back to wartime innovations, he may have been wide of the mark.

I have digressed into ESG-critique once again – apologies, it annoys me a lot. But the issue of governance has cropped up again at Tesla this week, so I’ll stick to the theme for now. As I wrote a couple of weeks ago, we should all be paying attention to Tesla, being as it is the poster child of the market exuberance we are currently experiencing. I hadn’t expected yet another governance blow up at that point, which came in the form of a Twitter poll from Elon Musk which wiped tens of billions of dollars from the value of the company. And while Mr Musk may not yet have sold the 10% of his shares as advised by his Twitter followers, his brother Kimbal offloaded a few millions-worth just days before. The SEC seems to be asleep at the wheel of what is certainly not a self-driving car.

Anyway, I digress again. But if an ill-advised tweet can do that to a company’s share price, then I’m not sure it’s one that I’d be comfortable investing in. I still think the main reason for not buying Tesla shares is because I think its competition will catch up with it, though. And, hey presto, this week Volkswagen has said that it’s going to build a new EV factory from scratch and make a new highly autonomous vehicle, the Trinity, there. The 250,000 car a year greenfield facility will allow VW to build each new Trinity in just 10 hours, down from the current 30 hours needed to build its current electric range, rivalling the new Tesla Gigafactory being built in Berlin. As I said before, it may be hard to bet against meme-Lord Doge, but I don’t fancy his chances against the might of German industry either.

Talking of betting, Phil and I are spending the next week and a bit focusing on what is often described as the Aim casino. I’m not really sure it is any more of a casino than any other market as long as you do your homework. Yes, there are lots of odd little companies among its near-thousand strong membership that could easily part a fool and his/her money. But there are also lots of great businesses that are very well run and worthy of investment if the price is right. They’re the ones Phil and I will be attempting to dig out with the help of a little bit of screening and a lot of fundamental analysis. Keep an eye on this site this week for updates – and if the sleaze get too much and my back gets too bad, I might even send out a random email or two to relieve the pressure.

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