Can Socially-responsible Investing pay Dividends – to Investors and Humanity?
Over the past 30 years, socially responsible investing has grown like Spring dandelions in my backyard. Back in the 1990s there were a handful of mutual funds that invested in “doing well by doing good.” Now there are nearly 500 such funds. These funds tend to avoid investing in alcohol, tobacco and firearms, as well as nuclear utility stocks. I never kept close tabs on these funds but I don’t recall seeing any that really killed it in terms of performance. I always thought the ultimate in socially-responsible investing, was in healthcare. Surely treating and curing disease has to count for something in trying to make a positive impact on society.
But lately, some healthcare stocks—notably big pharma – are getting black eyes in the press. Mylan, Gilead, Pfizer and dozens of others have been lambasted for large price hikes in drugs, for trying to do corporate tax inversions to lower their tax bill, or for both.
Interestingly, Fortune Magazine recently ran an article entitled “Change the World.” It highlighted how big business is taking on society’s biggest problems. A few big pharma companies made the list. I have summarized a few of the salient comments below.
Gilead—One of the great success stories in Big Pharma/biotech, Gilead was eviscerated for charging $84,000 for its hugely successful drug that virtually cures Hepatitis C. What the press and the critics fail to point out is that Gilead has struck deals with several generic drug companies in India to distribute Hep C drugs to many underdeveloped and under-resourced countries.
JNJ—While Tuberculosis is preventable and curable, millions of people still fall victim to the disease. Some fall victim to a drug-resistant form of the disease as well. Sirturo is approved for the drug-resistant form of the disease. As Fortune pointed out, 10,000 people have been treated in over 40 countries.
Becton Dickinson—One of the major problems in developing countries and one of the primary reasons diseases like AIDs have engulfed sub-Saharan Africa is because of shortages of needles for mass inoculations. The result is that understaffed and under-supplied clinics have to re-use syringes. This has been a catastrophe. Becton Dickinson is a leader in the manufacturing of syringes. They developed a “one shot syringe” (excuse the pun) that locks up after one shot, thus preventing re-use. They supplied billions of these syringes over the last 15 years at exceedingly low costs.
Glaxo SmithKline—Perhaps one of the oldest companies in the world, Glaxo SmithKline has been making a substantial impact in the area of vaccines and making sure drugs are available in the developing world. They have spent decades trying to formulate a vaccine for malaria—a disease which claims many lives.
CVS Health—Operating more in the domestic front, CVS recently added “Health” to their name. This isn’t lip service either. They ditched the cigarette business and added “MINUTE CLINICS” to their retail stores in 1,100 locations. These small clinics are manned by Nurses and Physicians Assistants and make healthcare much more accessible and affordable to a large portion of the country.
Two of these issues (JNJ and Becton Dickinson) are in the In Sickness and Wealth Portfolio. CVS Health is on the watch list to be added as it has sold off from its high. Glaxo has a very high dividend and some promising product in the pipeline.
You can’t always believe everything you read in the news. Right now, especially, with elections only two months away, it’s open season on healthcare companies. I find this disturbing given all the good they do for patients, and what some of them are trying to accomplish for society. Hopefully we can keep an open perspective.