5 Best Ethical Companies to Invest in According to Reddit

2. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 240

Amazon.com, Inc. (NASDAQ:AMZN) is added in our list of the best ethical companies to invest in because it’s one of the biggest holdings of Vanguard FTSE Social Index Fund Institutional Shares (MUTF:VFTNX), which is recommended by Redditors for ethical investing. VFTNX aims to track the performance of the FTSE4Good US Select Index. The fund’s holdings are selected based on ESG criteria and excludes companies that are involved in adult entertainment, alcohol, tobacco, cannabis, gambling, chemical and biological weapons, cluster munitions, anti-personnel landmines and nuclear weapons.

While Amazon.com, Inc. (NASDAQ:AMZN)’s ESG scores are not as impressive as those of other major tech companies like Microsoft and Apple, the company lists several projects and achievements related to ESG on its website and frequently makes headlines with its major investments in the ESG space.

Polen Global Growth Strategy made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2023 investor letter:

“We raised our position in Amazon.com, Inc. (NASDAQ:AMZN). During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.

For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”