What can be said in praise of Amazon (NASDAQ:AMZN) that hasn’t been shouted from a Sunday pulpit before? I mean, we could make up stuff. Only I’m not sure people would dismiss it. Like: AMZN stock will hit $40,000 by 2025. Founder Jeff Bezos is either the reincarnation of Osiris, Egyptian Lord of the Underworld, or the original mega-zillionaire, King Solomon. Amazon Web Services will establish the first cloud computing service on Mars.
Hell, I’m beginning to wonder if any of those items ring of other-worldly truth.
Back here on Earth, AMZN stock has indeed proven a super-solid performer. Fortunes and portfolios have rightly been built on it. Especially at a time when bond yields are decidedly tepid, and standby blue-chip stocks look more like blue-haired lady stocks, Amazon keeps climbing.
It’s a steroid-injected combination of the Energizer Bunny, Olympian weightlifter and money-printing machine. And I’m not sure, for all the ridiculous amount of crap you can buy of Amazon.com, that they sell currency printing presses. Yet.
However some contrarian views of Amazon are at least worth discussing here. For all the money Bezos will carry off with him in 300 aircraft carriers when he departs as CEO this year, Amazon’s workers are notoriously underpaid and driven to ridiculous levels of stress. They’re treated, as a recent Time magazine piece noted, “like robots.”
Does that make AMZN stock, in some senses, a sin stock?
AMZN Stock and the Dark Side of the Consumer Force
Looking around my home, I see the fruits of my major-league consumerism. Many of them are dying on the vine. Shirts I don’t need and bought on the the flimsiest of whims. Electro gadgets that dive for the junk drawer as soon as I open the smiley Amazon box. Say what you will about AMZN stock — and yes, I own it. But the company’s bottom line depends in large part on compulsive consumer behavior. Here, I’m guilty as charged.
Another factor to consider is the atrocious carbon footprint of this company. Order something as small as a nail clipper, and it might just get shipped in a ginormous cardboard container. It will come to you on a big blue truck that surely isn’t running on electricity or getting, say, 30 miles to the gallon. The company has made green pledges. But by “green,” they must mean cash. According to the Associated Press, Amazon’s carbon footprint grew 15% in 2019.
That’s a big, big deal, given that the company is worth some $1.55 trillion. Imagine if they pumped even 5% of that back into better employee treatment. Or quashing the 51 million-plus metric tons of carbon dioxide they dump into the planet’s atmosphere. So: AMZN stock = sin stock? You tell me.
ESG Investing and Why It Matters
Lest you think I have become the self-appointed tree hugger of InvestorPlace, let me make this clear as Waterford crystal. AMZN stock raises serious doubts for a certain kind of investor. And this has everything to do with cutting-edge investing. Everything. Did I say everything? Yup, everything.
The point here is this: No force dominates the institutional finance strategies of the world today like ESG investing. It stands for Environmental, Social and Governance factors that measure how responsibly a company behaves. And it is behemoth, burgeoning business like nothing the markets and exchanges have ever seen.
How big? Even a kingpin banker gets ESG. In 2019, top U.S. CEOs led by Jamie Dimon of JPMorgan Chase (NYSE:JPM) declared that public companies should put social responsibility above profit. Don’t worry, my InvestorPlace homies, he didn’t say “zero profit.” As 2020 drew to a close, assets connected to ESG investing totaled $1.26 trillion.
Amazon’s Dubious ESG Performance
As I write this, Europe is moving full steam towards 100% ESG investments in pension fund portfolios, corporate holdings and specialized funds offered by investment banks. You’d never find the petroleum fat cat and climate change denier ExxonMobil Corp. (NYSE:XOM) there. But you would definitely find an electric vehicle company such as Tesla (NASDAQ:TSLA).
Now let’s do the math. TSLA stock is up 485% year over year. And XOM stock? Good returns as well but it hasn’t even broached the 100% return mark. Isn’t being a do-gooder fun?
Now, let’s go back to AMZN stock. Over six months, it’s flat. That’s right. Flat. Suddenly, that feathered Osiris suit doesn’t fit so well. Sorry, Mr. Bezos, but your billions in shareholder value haven’t advanced one iota since early September.
As I’ve outlined above, there’s a strong case that Amazon deserves low if not failing grades for its environmental and social track record. Warehouses should not be worker gulags. An order for two packs of Tic Tacs doesn’t need to be on a truck that spews exhaust and consumes gas.
It’s Complicated … But Here’s Why to Buy
I’ve also mentioned above that I own AMZN stock. Huh? Does this make me a hypocrite? An apologist? A craver of ovular orange Tic Tac packs delivered to my humble abode via jumbo jet and cargo van?
I’ll be honest: I wrestle with this. A lot. The tricky factor is that much of my investment portfolio sits in that ESG pocket. I love electric vehicles. I backed Pfizer (NYSE:PZE) and Moderna (NASDAQ:MRNA) as they closed in on and conquered the novel coronavirus. It feels good that my money, for a time, was on the right side of history.
And yet, Amazon doesn’t cross my bottom-feeder bottom line. I consider tobacco purveyors, oil companies and the military-industrial complex off limits. And with AMZN stock, it’s a tad more complicated. As a fan of big tech, including Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), I consider Amazon right up there. Its web services operation, not its streaming or e-commerce, serves as the primary revenue driver.
So for now — despite its tepid performance of late and my lingering concerns about its ESG track record — Amazon.com stays in my portfolio. I take umbrage in the fact that it’s bringing a lot of good into people’s lives, too. And that 31 out of 31 analysts, according to TipRanks, call it a buy.
But I will continue to wrestle. Even though it will be hard. Because my consumerist self must hold off on that green-and-red, hungry-shark, Lucha Libre Mexican Wrestling Mask. At $13.85, it’s a screaming bargain.
On the date of publication, Lou Carlozo held long positions in AMZN, TSLA, AAPL and MSFT.