Journalism ethics and share trading

Telecom NZ shares hit a low of NZ$1.79 in June 2010. At the time I told friends to pick up shares at that price because they were massively undervalued.

Earlier this week Telecom NZ’s share price touched NZ$2.75: a profit of more than 50%. And that’s before the healthy 20 cents per share dividend announced at this year’s results briefing.

All-in-all someone picking up Telecom NZ stock at NZ$1.79 would get close to a 65% return on the investment in a little over a year.

I didn’t buy any myself. Even though I knew there would be a healthy profit.

And I’m not kicking myself.

That’s because my main job as a freelance journalist involves writing about Telecom NZ and the New Zealand telecommunications industry for CommsDay.

I’m no market guru. It was clear traders were unnecessarily pessimistic about Telecom NZ’s prospects. It’s a well-managed company with a steady income stream and, at the time, lots of potential for improvement.

There are no laws stopping a telecommunications journalist from trading in Telecom NZ shares. But it would be dishonest and unethical. I’m too much the old-school journalist to go down that route.

It’s about not cheating my readers.

If I owned Telecom NZ shares I could influence the share price.

Suppose I picked up a damaging story about the company. I could profit by not revealing the story. Things work the other way around too with positive news.

Some journalists think owning shares is fine so long as they disclose the information. That’s fine when, say, writing a positive story about the company concerned. But it wouldn’t help anyone when a negative story is kept out of print.

That’s why I won’t buy any telecommunications industry shares.

It won’t stop me from investing elsewhere.