How I Loathe the Gambling Industry and Buy Gambling Stocks

27 thoughts on “How I Loathe the Gambling Industry and Buy Gambling Stocks”

1. Thanks Steve.
   Great post.
   Can’t see that it is cynical to see the short comings in an industry but still be prepared after analysis to invest in it.
   Donation details?

   • Hi Craig – there’s a link at the bottom of the post.

2. Nice article. Well done Ed keep moving forwards.

3. Are there any restrictions on what Forager will invest it? Tobacco? Coal mining? Pornography? Guns?

4. Hi Steve. Well said. I never know if I am an idealistic realist or a realistic idealist, but whatever I am, I agree with your thoughts completely.
   If an individual chooses not to invest in SGR I will respect that decision.
   But you are not appointed to be our spiritual leader or moral compass. Your job is to invest our money for profit in legitimate businesses. One must face reality.
   Well done.

5. I understand that reasoning but have always been uncomfortable with the idea of benefiting from shares in predatory companies. I don’t want to profit from others’ misery.

   • Thanks Stewart. That’s a perfectly understandable position and encapsulates the way a decent chunk of our client base feel. The important thing to recognise is that it’s a position that will make you feel better about yourself – a perfectly worthwhile aim – but it is unlikely to alleviate anyone’s misery.

6. I agree poker machines are a scouge on our civilisation.
   Once they were only in licensed clubs in NSW. Richard Face, the ALP member for Charlestown let them into the hotels in NSW. What a political legacy!

7. Your blog post today is most welcome, and deals openly with a significant social issue. I have for sometime been uncomfortable with this style of investment. However your frank approach and declaration of interest, reassures me as a Forager investor. Thank you.

8. Hi Steve,

   Your stance on gambling presents a tiered morally which places money above human wellbeing.

   You take actions at the glen to help gambling addicted people like your mate, so you believe your action here will make some positive difference but refuse to take any action at the source of the problem neither as an individual or more substantially as Forager (possible action is not a binary between investing or not doing so) where even small changes such as tighter regulation will have a much greater flow on effect than indirectly helping the effects of addiction after the fact at the Glen.

   The cynical view seems to present your actions; on the one hand at the glen, primarily as a conscience comforting PR exercise and; on the other regarding star, a fatalistic money grab which falsely denies the moral responsibility you express towards your friend as well as any impact possible by Forager (I assume Forager does not even encourage change to predatory behaviour even as a shareholder).

   Change only happens through individual action, companies consist of individuals who have emotion and empathy a sense of right and of what they can get away with.

   There is a saying something along the lines of ‘when those with a conscience stay quiet, evil triumphs’

   You have a conscience Steve but as a guiding hand at Forager are choosing to be silent.

   • Hi William and Alison,

     I’d say the issues are segregated rather than tiered. I don’t help The Glen to feel better about investing in a casino. And I don’t see our investment precluding me from campaigning against its interests (I do think using your money to do that crosses a line). They are two completely separate parts of my life.

     I help out at The Glen because I love the people up there, they do a wonderful job and my skill set might help out in the tinniest little way. It’s not some sort of credit generating scheme. It’s not even significant relative to the contributions many others make to the Glen and other wonderful causes. It’s just something I like doing with my spare time.

     When I cross the line into work, my job is to find a concentrated portfolio of the best investment opportunities on the ASX. That’s what the PDS says. If you and I decide we want to launch a managed fund that is going to change the world, then we need to decide on how we are going to do that, agree what changes we are hoping to make and write a PDS that explains it. I don’t have any right to take a fund that wasn’t set up with that purpose and use to it further my own personal agenda.

     I guess you could argue that I should be doing something more worthwhile with my life. That might be fair enough, but probably a separate conversation.
     Cheers,
     Steve

     • I do not expect Forager to be an activist organisation, as you say that is not what the PDS proposed. Though I’m not sure it proposed to support the conversion of vulnerable people into ice addicts in pursuit of a dollar either.

       There has surely has to be line somewhere.

       This moral separation is what I take issue with, investing is not something were moral assessment is left at the door, that is assessment of right and wrong, good and bad. Investment decisions make moral judgments all the time in attempting to assess ‘quality’ of a companies culture, management honesty, the fairness or rights issues or contract arrangements, the negative effect of accounting trickery, the risk to social license, reputation risk from unethical behaviour. I am sure there are many more you guys consider.

       It would seem sensible that some consideration of the damage a certain business does to individuals and society broadly should have a negative place in the weighting of any investment case. After all, any company does not exist in a silo.

9. I welcome this post, and I have been one Forager investor who struggles with the preponderance for gambling stocks in the portfolio, such as Jumbo in the past. My eyebrows also raised at Star considering there are so many undervalued opportunities in March to choose from, why not just avoid a company like this on ethical grounds. Ethics aside I think there will be enduring headwinds as more and more FUM will screen these companies out. Anyhow, I think I can live with the paradox as Steve explains it here. I would still encourage Forager to avoid these companies where possible though, e.g. if the investment thesis for company A is roughly the same vs company B (keeping in mind the uncertainties involved), then why not favour the ethical company in these cases as a tiebreaker?

10. Well done Steve – great post.

    I place my money with Forager to invest on my behalf in companies that you see value in. I trust your teams judgment in deciding what’s good value and where future value can be realised. SGR is trading @ 3.26 today so well done !!!

    I would specifically discourage you from getting into the debate around the industry in which companies operate and allowing this to significantly influence your investment decision. Every industry and business can have haters. Should Chochlear be less profitable and charge their customers less ??….. Let the market and customers decide what fair value for it’s services.

    I applaud you for your work with the Glen and that you invest your personal time and money in helping their cause. I will be making a donation to them, and hope that everyone else in the Forager community does their bit with a cause they believe in.

11. I think it’s fantastic that you are/how you are explaining your approach to these issues. In my view it doesn’t really matter what your approach is, more that your clients can have the full knowledge of how you think and can make their own decisions accordingly. This is something many bigger and older fund managers could learn from. Congratulations

    (and special congratulations to Ed)

12. Hi Steve,
    This is a tricky one.
    I know that you do good work and that Forager choosing whether to invest or not in a gambling stock makes absolutely no difference to the gambling industry or to those who suffer from it.
    Many Forager investors will agree with your justification and enjoy the profits and many, including me, would prefer not to be a shareholder (partner) in a business that so clearly profits from the misfortune of others.

13. Steve. A very courageous post on a very complicated ethical issue. I sympathise with the idea that there is no perfectly ethical investment – there are just so many layers of nuance that sometimes what appears to be an ethical investment may not in fact be the case (or you have to trade off between competing ethical principles). It is interesting to note that many technology companies like Facebook, Amazon and Google are included in sustainable investment fund strategies because they are ‘new world’ investments that do not involve fossil fuels. Then again I could argue that these companies (particularly social media) have facilitated echo chambers and the dissemination of misinformation which has not been a net good for societies around the globe. Also your argument that you can invest in a gambling company without supporting it per se only holds up if you are limiting yourself to trading shares on tbe secondary market. I hope for your sake that you never have to face a capital raising from one of these companies in the advent that equity financing determines whether a company stays afloat or goes bust (and you are faced with trading off your personal ethical stance for the dilution of shareholder value in the fund).

14. Hi Steve, your comparison between gambling and tobacco has some legitimacy.

    In the 1960’s and 1970’s because of tobacco taxes, Governments saw tobacco as a “voluntary tax” and a nice cash cow.
    It was only in the 1970’s some bright people demonstrated to Government that for every dollar received in tobacco taxes, eight dollars was spent on the health budget treating the effects of tobacco use. Suddenly having 35% of your adult population as smokers did not look like a bright idea.

    Today state Governments see poker machine taxes as a “voluntary tax” and a cash cow?

    I wonder how big the loss to the state and federal budgets are because of these poker machines?
    Look at the cost to the health budget from mental health issues, rehabilitation costs and violence to family members. How about police, court and prison budgets from crime caused to raise money for gambling? How about increased social security costs for people who lose their homes and gamble away their savings and super?
    Just like tobacco, poker machine taxes are a false economy, and it’s about time Governments figured this out.

15. Hi Forager investors

    So many considered and interesting posts. It’s wonderful that we can have a respectful debate.

    I, too, have always struggled with some of Forager’s investments, and I exited Forager International some time ago for that reason. However, for some reason, I stayed with FOR, albeit on a reduced investment.

    While I understand the secondary market nature of the investment, I personally find it difficult to sleep at night, knowing that some of the companies I invest in are promoting activities that cause so much human misery.

    I do think the situation is more nuanced than the view that investment and what a company does are segmented: I am strongly of the view that investment and the company’s operations are directly related. The company will do what it can to increase its returns so that investors get better returns from (in the case of SGR) more profitable gambling operations, and so that staff and management receive higher compensation. This means, for example, that SGR will lobby/ work to increase the profit they make from gambling. Investors reward the company for increasing its profits – by paying up for the shares and incentivising management for increasing profits – directly influencing an increase in gambling misery.

    Unless as investors, we incentivise those who work in the company to reduce profits. But that’s activism and killing your investment.

    With respect to other companies mentioned above such as Amazon and Google, I believe people are taking a good look at Amazon and its treatment of workers during COVID. Most things in life are on a spectrum, and we all need to decide where our tipping point is.

    Sadly, this discussion has made me focus to the point that I think the time has come for me to say goodbye to Forager. I am not criticising Forager – the PDS doesn’t limit the investments, it’s my own choice. However, much as I really like a lot of what you do, I need to live with myself. I can only do that in Forager if we use our investment to kill the business – rather counterproductive.

    I will be looking to exit over the next few months and wish you well. And I will be very keen to reinvest if I hear of a change of policy.

    • Hi Lorna,

      Thanks a lot for the considered response and for the support over the years.

      I don’t think we disagree on much. Only whether you not owning the shares is going to change any of those incentives or outcomes.

      All the best and I’ll definitely let you know if we can come up with a product that I think can really change things.

      Cheers,
      Steve

16. Hi Steve,
    Loosing Lorna as an investor in Forager on ethical grounds is a cause for reflection I think.
    Investing in businesses such as gambling stocks and pay day loan businesses for example brings to mind the term “bottom feeders” and makes me feel uncomfortable. Enjoying the discussion, but I think I’m with Lorna.

    • Thanks Chris,

      I agree. It’s something we need to give a lot of thought to as a business and as a fund. Even just writing my own thoughts out and having the discussion has been cause for introspection.

      As part of that, though, I would like people like you to think more about what change you would like to see. Most of the feedback seems to be that owning a casino simply makes people feel bad, and therefore they would rather not do it. That doesn’t really gel with me. If we are going to change something, and potentially make less money, I really want to understand how that change is going to make a difference.

      Lorna touched on potentially using our shareholding in companies to nudge (or push, if we own enough) them in a certain direction. If we can all agree on what that direction should be (sustainability, diversity and harm minimisation, for example), we can write letters, have conversations and ultimately vote our shares in ways that further that agenda. Why shouldn’t Star have a director on its board whose expertise is gambling addiction? Why shouldn’t the company be leading the industry with programs to help those people it is harming? That might curb our financial upside, but can still make for an attractive, sustainable long-term investment. Gambling is not going to go away, but it can be a lot less damaging than it is at the moment.

      Let’s keep the debate going and I’ll keep thinking and discussing with the team at our end.

      Cheers,
      Steve

17. Steve,
    1. Forager has our full support… unreservedly.
    2. Blog themes above of blame, fault and shame are in lined with the political correctness of the the 21st century.
    4. In short, if someone is thinking right, then it merely leaves the other person wrong.
    5. Should and must, only make sense in life and death situations.
    6. Such noise only erodes Forager’s attention to the task at hand – above market index returns over the long term.
    7. As an aside, there are many professions make their income off the pain and suffering of others – health and legal are two such examples.
    8. In closing, Steve, your self monitoring of boundaries is exemplary.

18. My problem with holding gambling stocks is thinking about pokies puts me in a bad mood, so it’s not fun analysing them. I’m ok with my fund manager buying them though.

19. Whether or not the fund or any investor makes money from the change in share price of a gambling company has no relation to the fact that ‘entertainment’ companies are a pox on our society. Regardless of who owns the casino, it’s going to make money until substantial society demand is addressed and predatory supply is curtailed. Forager (us) might as well be making the money in the mean time. To me, how ethically the profit is used is as, if not more, important than how it was obtained.

    In saying that, our world would be infinitely happier without pokies.

    Can Forager start a new fund that uses the profits to buy pokies licences then buries them all in a volcano somewhere? Don’t know what you’d have to invest into the make enough money to do this? Oil? Mining? Banking? And, oh yeah, just make sure you sell SGR before you do it. Wait, I’m only half joking. Is this possible?

20. I don’t have a strict moral leaning in either direction on this as I can see valid arguments from both sides.
    I understand its difficult to draw the line when even an investment in a bank can be seen unethical given some of their recent antics where they also benefited from ripping off customers, dead and alive.
    But Steve, I do wonder why you would choose to invest in a business that is so likely to upset fund members just because your mandate allows it.
    Its seems that some of these investments in less ‘ethical’ businesses are likely to result in either more redemptions from members or more selling on the ASX to potentially widen the NTA value gap. This does not contribute to adding to members investment value and therefore needs to be considered.

    I realise we can , and some are, voting with their feet, but as most of us are long term investors, is this what you really want? Surely there can be a happier medium.

21. I think it’s just convenient for you to say you don’t have an impact, where in a recent ‘reflections’ post you mention taking a more active role as an investor in the companies you invest in. So which is it, you have no impact as an investor, or as an investor, you can enact change from within?

    But even if we boil it down to your stance that it’s all about investments returns, shall we gloss over the debacle that was Funeral Insurance? An obvious morally bankrupt sector and company, which the fund invested in because of the risk weighted return.

    I think ethical investing is a silly term and an even sillier one to police, as everyone’s ethics is different, so I don’t expect the fund to make decisions on ethics alone. I do however thing regulatory change is a risk that is often under-weighted by many fund mangers. Like the market, in the long run, society is a weighing machine.

    Personally I don’t have a problem avoiding pokie investments in all their forms, including casino’s. For the same reasons you give for not investing in banks, there are plenty of other opportunities out there to get excited about.