The Motley Fool: The ABCs of ESGs

Ask the Fool: The ABCs of ESGs

Q: What’s an ESG score? J.F., Bridgeport, West Virginia
A: It’s a number that describes how well a company addresses environmental, social and governance (ESG) issues. The score reflects how well the company protects the environment; how well it serves not only shareholders but also customers, employees and suppliers; and how good it is on leadership, executive compensation, internal controls and shareholder rights among other things.
The score considers environmental factors such as recycling, renewable energy use and emissions; governance factors like diversity in the board of directors; and social factors, like ethical supply chain sourcing, and employee pay, benefits and safety. Multiple companies calculate and publish ESG ratings, with MSCI ESG ratings among the better known. You can look up a company’s ESG score at sites such as Finance.Yahoo.com (under “Sustainability”).
Q: Can a consumer credit counseling company help me get out of debt? I.K., Cayce, South Carolina
A: It might, but be careful, as they’re not all equally good. A good consumer credit counseling service can assess your financial situation, outline your options and help you develop a path out of debt. It may even be able to negotiate new payment terms with your creditors via a debt management plan. That allows you to make payments through the counseling service, which will then pay your creditors.
If you’re intrigued, do some research before signing up with any outfit, and perhaps favor nonprofit services. You may be able to find a certified credit counselor via the Financial Counseling Association of America (FCAA.org or 800-260-1875) or the National Foundation for Credit Counseling (NFCC.org or 800-388-2227). You might look up candidates at the Better Business Bureau (BBB.org) and learn more at the Federal Trade Commission (Consumer.FTC.gov).

Fool’s school: The psychology of money

Morgan Housel spent many years writing for The Motley Fool. In more recent years, he has become a bestselling author, known primarily for “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness” (Harriman House, $20). Here are some valuable thoughts from that book.
  • On playing it safe(r): “If there’s enough room for error in your savings rate that you can say, ‘It’d be great if the market returns 8% a year over the next 30 years, but if it only does 4% a year I’ll still be OK,’ the more valuable your plan becomes.” (So hope for the best, but prepare for the worst or at least for the possibility that your investments may underperform your expectations. Saving and investing more than you think you’ll need can be a smart move.)
  • On wealth: “The only way to be wealthy is to not spend the money that you do have. It’s not just the only way to accumulate wealth; it’s the very definition of wealth. … Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later.”
Everything’s relative: “The value of wealth is relative to what you need.” (If you have $500,000, you may be better off than someone with $1 million if you need and want less than they do.)
  • On Warren Buffett’s success: “Effectively all of Warren Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years. His skill is investing, but his secret is time.” (For best results, start saving and investing as early as possible, and keep it up for as long as you can. Getting your young ones started early can be a powerful life-changer for them, too.)
  • On not aiming for the greatest returns: “I can afford to not be the greatest investor in the world, but I can’t afford to be a bad one.”
Check out the book for many fascinating stories and instructive lessons that can help you become wealthier.

My smartest investment: Sold Nvidia but only half

My smartest investment move, believe it or not, was selling shares of Nvidia at less than half of the stock’s recent price. I only sold half of my shares, though. At the ridiculous price-to-earnings (P/E) ratio it had at the time, I think this was the right thing to do.
I decided to sell only half after thinking about regret minimization: What would I regret more: holding and watching the position drop by half or even lower (which has happened to me on many occasions) or selling half my position and watching the stock go up and up? For me, the right decision was to trim the holding, as at the time Nvidia was 20% of my portfolio. Interestingly, it’s now again at 20% of my portfolio. R.J., online
The Fool responds: This is a great story and one some might think of as a regrettable investment move. It was a smart move for you, though, because you thought about how much risk you were willing to take, and you managed it well. We sometimes forget that we can always sell some of a position in a stock instead of all of it. You evaluated the stock’s valuation and decided it was rather steep. You assessed your risk tolerance. And you made a move that still left you with a significant stake in the company.
(Do you have a smart or regrettable investment move to share with us? Email it to [email protected].)

Foolish trivia: Name that company

I trace my roots back to 1991, when I was conceived and referred to as “Honest Rick’s Used Cars.” I opened my first store with my current name in 1993 as a subsidiary of Circuit City. (I was spun off in 2002.) With a recent market value near $12 billion, I’m the largest used auto retailer in the U.S. In my last fiscal year, I sold about 770,000 used vehicles and 550,000 wholesale vehicles, while my finance division originated more than $8 billion in loans. I boast close to 30,000 employees and more than 240 locations across 41 states. Who am I?

Last week’s trivia answer

I trace my roots back to the founding of a bank in 1812 in New York City; it was chartered in 1865 as the National City Bank of New York. In the 1970s, I helped pioneer automated teller machines, installing them all over the city. My current identity was formed in 1998, when my predecessor merged with Travelers Group (so my current logo includes a red umbrella). With a recent market value topping $110 billion, I’m a global banking giant, with more than 100 million customers in nearly 180 countries and jurisdictions. Who am I? (Answer: Citigroup)

The Motley Fool take: Life sciences in the cloud

Veeva Systems (NYSE: VEEV) provides cloud solutions for life sciences companies. Its clients include some of the largest pharmaceutical and health care companies in the world, such as Merck, Johnson & Johnson, Novo Nordisk and Eli Lilly. In recent years, consumer goods companies such as Colgate-Palmolive, Unilever and Mattel have begun using its cloud solutions.
Veeva helps clients improve their operational efficiency, especially the transition from research and development to commercial product launches. Its platforms manage clinical, regulatory and quality control while enabling users to collaborate and work with stakeholders. Its cloud offerings do everything from helping clients design clinical trials to aggregating vital content to streamlining patient registration to publishing regulatory submissions.
Most of Veeva Systems’ revenue comes from subscription services for its cloud offerings. In its fiscal first quarter, revenue grew 24% year over year, while subscription revenue jumped 29% and net income rose 23%.
Veeva is an asset-light business with a strong competitive advantage in its industry because of its focus on health care and consumer goods companies. Its stock appears undervalued at recent levels. (The Motley Fool owns shares of and recommends Veeva Systems.)

— distributed by Andrews McMeel Syndication

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