Companies that favor Democrats produce outsize stock returns, study says

[swag]

http://www.marketwatch.com/News/Story/Story.aspx?guid={A88DEDDA-1279-475C-903D-85EF3B1324D9}&siteid=mktw&dist=

. . .

According to the firm's research paper, "The Blue Factor," an index of 76 companies in the S&P 500 meeting certain ethical criteria and favoring Democrats -- "blue" stocks -- would have topped a group of about 380 Republican "red" stocks by 15.6 percentage points annualized over the five years through August.

In addition, the large-capitalization blue companies did 13.1 percentage points better than their S&P benchmark, the study said. Moreover, blue S&P companies achieved this result without any representation in the high-octane energy sector.
Even after omitting blue companies with market values above $25 billion, including Apple Computer Inc., Google Inc., and Costco Wholesale Corp., the remaining blue stocks would still have beaten the S&P 500.

A $100 investment five years ago in the large-cap blue companies would have grown to around $239, the paper noted. An equivalent investment in large-cap "red" companies, such as ExxonMobil Corp. and Dell Inc., would be worth around $118.

The study, released Tuesday, required companies to meet a set of ethical standards common to socially responsible investing, such as corporate governance, environmental sensitivity, workers' rights and avoidance of products including tobacco and weapons.

Then the researchers layered in the political contributions of S&P 500 companies and their three highest-ranking executives over the past decade, based on publicly available records.

. . .

[AX10]

1. kick

[DaveJ]

2. THANK YOU

I've been waiting for that revelation to emerge. I have been saying for a long time that Democrats are hard workers and Republicans are lazy... leaches that expect everyone else to work for them. Glad we have numbers to prove it now.

[swag]

4. You know what else? Stocks and the economy do better under Dem admins.

as we were discussing here last week.

http://www.theunknownideal.com/2006/09/some_notes_about_the_dows_high.html

. . .

The stock market has historically done much better under Democratic administrations than under Republican administrations, as Professor Jeremy Siegel himself a Republican booster (if only for the sake of his precious dividend tax cut), showed in the last edition of Stocks for the Long Run.

Forbes has noted that the US economy has historically done better under Democrats. And the Stock Trader's Almanac provides this handy comparison of the Dow under Democrats and Republicans:

DJIA, 1981 - 2004
Republican years Avg. annual change: 6.9%
Democratic years Avg. annual change: 13.3%

. . .

[NewJeffCT]

8. Job growth has been better under Dems, too

Everybody knows how good Clinton was at creating jobs - but, Jimmy Carter had an even better record (percentage-wise) in his 4 year tenure.

Bush & Bush both sucked. Reagan did well his 2nd term (after he raised taxes in '83), but poorly his first term.

I'll have to see if I can find the article.

[swag]

15. Good point. Jobs are always forgotten in the discussion of a

"growing" economy or successful stock market.

Hence the recent spreading anxiety (especially among worker and former workers) about things like income inequality.

[lonestarnot]

22. Wasn't the jobs report due out this week? Today even?

[NewJeffCT]

24. Don't even get me started on job creation under Bush

The media has not challenged any Republic talking head when they are practicallly orgasming over Bush job creation numbers... I've heard Republics on air several times beaming over how Bush has created 5.5 million jobs over the last 3 years, when that total really sucks, and sucks badly.

To put it in perspective.

Bill Clinton created over 22,000,000 jobs in 8 years, or 2,750,000 per year. For a three year period, Clinton’s economy created, on average 8,250,000 jobs. So, an average 3 year period under Clinton almost 3 million more jobs than a great period under Bush.

More perspective.

Our population is growing, and more people enter the work force each month. To account for the growing population, we need to create at least 150,000 jobs per month just to stay even. Meaning, the economy has to create at least 1,800,000 jobs per year (150,000 x 12) just to account for our rising population.

So, over a 3 year period, the economy would need to create over 5,400,000 just to break even. So, Bush has created a net gain of 100,000 jobs over the last 3 years that Republics seems to be glowing about.

To top it off, Bush has presided over a huge increase in the number of government jobs due to the creation of the Fatherland Security Dept. So, he’s really been a net loss for the all important private sector. Clinton actually trimmed government jobs, so his private sector numbers are even more impressive if you take that into account.

[lonestarnot]

36. I know, I know and those created are 3 fitee and hour.

But seriously, the job report came out this week or is coming out this week. I wanted to know what it lied about or how the information was twisted to make them look gooooooood, :puke: I mean with the pervert stuff for two weeks they've got to lie about something not quite so serious to johnnie pub lickkkkk

[lonestarnot]

37. I know, I know and those created are 3 fitee and hour.

But seriously, the job report came out this week or is coming out this week. I wanted to know what it lied about or how the information was twisted to make them look gooooooood, :puke: I mean with the pervert stuff for two weeks they've got to lie about something not quite so serious to johnnie pub lickkkkk

[SammyWinstonJack]

28. From Wikipedia:

Creation of 22.5 million jobs-the most jobs ever created under a single administration and more than were created in the previous 12 years. Of the total new jobs, 20.7 million or 92%, were in the private sector. Couldn't find the stats for Carter/jobs

[Demeter]

3. Thanks for the Link

I want to investigate this.

[eallen]

5. I suspect it has a lot with the kind of company more likely to be Blue...

As Jon Stewart put it, reality has a definite liberal bias.

[Norrin Radd]

11. As Colbert put it.

;-)

[eallen]

14. Yes. Thank you for the correction.

[Selatius]

6. I would guess SHITTY ethical standards DRIVE AWAY BUSINESS

If you have weak ethics enforcement mechanisms and think it's okay to bend the rules to hit earnings projections and such, of course investors and customers are going to be less willing to do any business with you.

Nobody wants to be tricked out of money or exploited.

[NewJeffCT]

7. Why do you think the stock market has been going up lately?

Anticipation of a Democratic Congress that can get spending under control, thereby lowering long-term interest rates, and hopefully leading to a rebound in housing.

[girl gone mad]

9. The idea that Republicans are fiscally responsible...

is nothing more than good marketing.

[progressoid]

10. Cool - gonna read that one tonight (then send to my RW Mother in law).

[swag]

12. Republican-run "Socially Irresponsible" fund that is performing so badly

Contrast with the stupid investment idea of the year, Republican nutjobs Milloy and Borelli's "socially irresponsible" fund whose performance is in the shitcan and whose investors are charged exorbitant expenses:

Right-wing fund managers Steve Milloy and Tom Borelli are grabbing lots of attention for accusing companies of devoting resources to pet causes instead of maximizing profits. Last month they showed up at Goldman Sachs' annual meeting in New York to attack CEO Hank Paulson for, among other things, chairing the Nature Conservancy and authorizing Goldman's donation of land it owned in Chile to the Wildlife Conservation Society. But a look at the returns of the pair's grandly named Free Enterprise Action Fund suggests that their own bottom line could use some help. The $5.6 million fund gained just 2.32 percent from March 1, 2005, its first day in business, through the end of the year, net of expenses. That's well below the S&P 500's 4.72 percent gain during the same period -- and it doesn't hold a candle to the 18 percent appreciation of Goldman shares.

Sure enough, the partners hold their own venture to different standards. Their returns, they say, don't matter as much as their stated cause: counteracting the influence of so-called socially responsible investment firms, like Domini Social Investments and Calvert, on corporate behavior.

"We're not trying to be a high-performing mutual fund," Milloy, 47, tells Institutional Investor. "We are imitating the left. Left-wing social-political activists don't like capitalism. They hide behind human rights. We want to help oppose that."

The pair have plenty of experience standing up for corporate America's right to ignore do-gooders. In his spare time Milloy publishes JunkScience.com, a Web site devoted to debunking global warming as a "myth." He formerly ran the Free Enterprise Action Institute, which was funded in part by ExxonMobil. Borelli previously worked as a lobbyist for food and tobacco giant Altria Group. . . .

I'm sure these self-professed champions of capitalism will attract a lot of investors with a fund philosophy like "We're not trying to perform well." Yeah, great idea. The free market's gonna eat that right up.

[brg5001]

26. Ha! "The left hates capitalism" yet blue biz is kicking their asses

Swag, thanks for a great post. I had no idea that such fund managers existed, let alone that investors would be foolish enough to entrust them with their funds. I wonder if these right-wing guardians of morality and purity (and environmental degradation) are investing in tobacco, gambling and liquor stocks that are avoided by socially responsible funds.

As a prior poster mentioned, blue business is just good business. We think long-term, which doesn't mean we hate capitalism, it means we hate myopia. Recycling helps conserve resources. Domestic partner benefits attract a larger pool of qualified employees. Providing affordable health benefits including preventive care allows these businesses to be more productive and enjoy a more stable work force. Progressive corporate governance ensures that CEOs can't pack the board with cronies who can be bribed with no-bid consulting contracts in return for fat compensation packages (all at shareholder expense). Organic products producers ensure that their customers live longer and remain in better health, while both their customers and suppliers avoid the unforseen consequences of pesticide use and factory farm techniques. Selling tobacco to your customers ultimately kills them, which isn't particularly good for business in the long-term.

Steve Milloy and Tom Borelli are a pair of flaming buttholes who are more interested in promoting an untenable ideological viewpoint than undertaking successful investments. Perhaps they won't be so smug when they end up going bankrupt and need to apply at one of the "capitalism-hating" successful businesses that they denigrate.

[NoAmericanTaliban]

13. Good info. I'm going to investigate the RUT fund

Blue companies tend to treat their employees better and therefore don't have as much turnover which can cost a business a lot of money.

The analysis works for a 5 year average, but for a 1 year average the numbers for the red companies may be better because of all the oil & war profits.

[sofa king]

16. Can someone explain why in Doofus-American for me?

I'm not a financial mind, but my guess is that the so-called blue stocks probably invest a lot more money in infrastructure and presciently avoid future expenses by not taking environmental shortcuts. They might even honestly report their earnings.

Am I on the right track?

[Starlight]

18. Less problems with embezzlement, padding expense reports, hiring unqualif>

ied friends & family. Running a business ethically really cuts down on expenses.

[sofa king]

20. Thank you, Starlight.

So often I think of unethical business behavior as being cheap at the expense of other people's health and welfare, but you reminded me that unethical behavior can also be greedy as hell.

I guess I just assume that's the case for all businesses.

[swag]

23. "Earnings Quality" probably comes into play as well,

feeding off some of the factors you cited.

I need to look at the study and cross-reference the companies for how trusted their earnings are.

[JudyM]

32. I 'd reaffirm what Starlight said, plus emphasize the conflict-of-interest

aspect: not only would an ethically-operated company be less prone to hiring unqualified friends/family, but also it is my experience as a corporate ethics person that a great deal of money is lost when employees (at any level of the co) are permitted to hire without an arms' length competitive bidding process. This can be due to laziness, lack of time or a friendly relationship of whatever nature with a particular contractor. In an ethically-run public company, the shareholders' interest/financial stewardship is generally more present in the employees' minds whenever there is money to be spent.

[malaise]

17. Buy blue

Declare war on Red business.

[muntrv]

19. The Enron debacle emphasizes this point.

Blue companies actually make profits the right way, whereas red companies cook the books to make profits.

[emmadoggy]

21. You know, I'm really not surprised by this at all...

Over the years I have seen so many little reports/features/stories etc. about Company X, owned by John Doe who did ok, but has always done business THIS way, but then one day decided to implement some new, more environmentally friendly technique and wow, it started saving them so much money that the company was able to spend more on something else or upgrade somewhere they really needed to or whatever, which in turn started making them more successful and lucrative.
Or Company Y, who implemented these really great, progressive employee benefits and works really hard at treating the employees well and keeping them happy and lo and behold, the employees ARE happy AND loyal and dedicated and highly productive which in turn makes the company -you guessed it! - MORE MONEY!

I realize that there is more to it than that - but it just doesn't surprise me that the companies with a more progressive style do better. Innovation not just in WHAT they do or produce, but innovation in HOW they do it says a lot to me about a company. I really admire and respect those companies that really buck the old, crusty, dusty way of doing things (and treating people) and really shake it off and forge a new trail. They prove time and time again, that implementing higher energy efficiency, or more environmentally friendly, or more employee friendly techniques really ARE NOT the fool-hardy, too expensive, "it'll put us out of business" sorts of things that the "conventional wisdom" old stalwarts always spout off about.

[redqueen]

25. Hah... thanks!

Really not too suprising, is it?

:D

[swag]

27. No, completely unsurprising that shareholders would value corporations

with more integrity more highly.

And just another confirmation of recent reports of good performance by "socially responsible" mutual funds and better profitability by corporations that acknowledge their responsibilities.

[Tigress DEM]

29. Naturally

as in green attracts green.

[Tigress DEM]

30. Here is a who's who of how to buy blue...

http://www.buyblue.org/?q=directory/alpha





Research Methodology
Posted by conversion on July 15, 2005 - 6:41pm
Introduction
BuyBlue.org is currently using two different research methodologies to assign each company’s ratings – one for political donations and one for corporate ratings. The corporate ratings consist of five broadly blue categories of concern:

an environmental rating
a labor & human rights rating
an employment equality rating
a corporate and social responsibility rating
an industry practices rating
The sources for all of the data acquired during research are carefully cited in the company profile on a section by section basis.

Buyblue.org considers the accuracy of the information presented on our website as our highest priority, so there is no interest in deception. If you, or anyone, sees an error on the website or believes we are missing something, please let us know by sending us an email. As long as the information submitted can be verified, we will update the website to reflect the change.

Political Contributions Methodology
BuyBlue’s political contributions methodology uses actual dollar contribution tallies by top executives, top officers and PAC’s (political action committees) to create one percentage rating for each company which is displayed in a graphical format. We do this because 2003-2004 federal campaign finance laws make it illegal for corporations to contribute directly to politicians, and so companies routinely find ways around those laws (i.e. PAC’s can funnel money, executives can buy influence, etc.).

The graph above breaks down the symbols we use to represent contribution ratings. The type of icon is determined by the percentage of total contributions. To ensure that the ratings are truly comparable, we adhere to a strict research protocol involving the following three sources: Hoovers.com; Federal Election Commission; and the Center for Responsive Politics. On Hoovers.com, we find the names of the top three key executives in a chosen company, as well as the names of executives of the company’s subsidiaries. We also get short company summaries, company addresses, phone numbers, fax numbers, and company websites from this site. The company websites help us identify top officers. We research all of these sources to make sure our information is accurate and up to date. When BuyBlue.org tallies political contributions, we get our information from the Federal Elections Commission site. We only consider donations from the three senior executives identified by the company website and by Hoovers.com, and any donations from Political Action Committees (PACs) associated with the company. We also count donations from spouses of senior executives, but only when we can confirm the relationship beyond a reasonable doubt. We never count contributions from rank and file employees in our data. We use The Center for Responsive Politics site to gather PAC information about a company because their presentation makes it easy to identify the distribution of the contributions of PACs between Democrats and Republicans. For each PAC we find, we summarize the spending for the election cycle and provide a link to opensecrets.org so you can examine the details if you wish.

[redqueen]

31. I love that website. :)

:kick:

[Tigress DEM]

33. It's a keeper!

Curious about your moniker. Red Queen? As in off with their heads, perhaps?

[redqueen]

34. Nah... from the Red Queen Principle

http://en.wikipedia.org/wiki/Red_Queen

:)

[Tigress DEM]

35. How's that for esoteric?

:hide: :hi:

[redqueen]

38. I dunno... I haven't asked her...

Sorry! I had to!
:hide: