Socially Responsible Investing: Very Profitable!
History hasn't always been kind to investors who try to earn profits while keeping their consciences clear. Companies need to stay solvent, and no matter how much good a company does, it won't survive in the marketplace if it doesn't make a profit. Many in the business community are rightfully skeptical of "purpose over profits" mantra.
Don't tell that to our top Rising Star
Though we're only 10 months into our inaugural year of Rising Star investing, a clear winner has emerged; Alyce Lomax, and her brand of socially responsible investing, is outperforming the S&P index by 16.5 percentage points and is almost 10 percentage points above her nearest competitor.
We here at the Fool encourage investing with a minimum three- to five-year timeline, so Alyce isn't doing backflips of joy yet. But because of her unique approach to investing, I sat down for an interview with her to talk about her portfolio.
Investing responsibly, with a twist
"To me, SRI means investing in companies that make a positive impact in our world -- whether through their products or their practices," Alyce says. Initially, she was also preparing herself for the kind of market-lagging performance that others before her had experienced. But in the process of molding her own portfolio, she realized a key difference between what she was doing and what others have done before.
- "Traditionally, SRI funds start with the whole universe of stocks available to them. Then, they screen out vice industries like liquor, cigarettes, or oil." Essentially, these funds look to eliminate to mold their portfolios.
- "I, on the other hand, started with no stocks, and got to be far more selective in what I was looking for." Alyce searched for opportunities that were the best of the best, both from a standard investing and an SRI point of view.
Though it might seem like a small distinction on the surface, Alyce's record shows that it has made a world of difference.
A diversity of choices
A quick look at some of Alyce's holdings shows that an SRI portfolio can be just as diverse as others, with sectors like consumer goods, consumer discretionary, industrial goods, and energy all included. If you click on the last column, you'll have full access to Alyce's reasoning behind these picks.
What It Does
Why It Fits With SRI
Clean Harbors (NYS: CLH)
Hazardous waste disposal
Waste Management (NYS: WM)
Solazyme (NAS: SZYM)
First Solar (NAS: FSLR)
Whole Foods (NAS: WFM)
EnerNOC (NAS: ENOC)
Pepsi (NYS: PEP)
Soda and snack food
While some of these choices, like Solazyme, might have been an obvious pick for any SRI-minded investor, others have surprised Alyce's readers. "I understand where people were coming from when they voiced their displeasure with my selection of Pepsi. But I'm really impressed with their innovativeness and think that if their green programs take off, they could lead the industry forward."
Timing is everything
Alyce is also quick to recognize that she's investing at a time where the market is ripe for socially conscious businesses. "Not only are consumers getting more educated and voting with their feet by only patronizing businesses with a broader purpose, but as resources become more limited, sustainable business will become some of the safest and most profitable investments."
Room in your portfolio?
Depending on the type of investor you are, there are plenty of great companies to consider when you look at Alyce's portfolio.
For those who like a little risk, I asked Alyce what her most speculative picks were. She was quick with her answer. "Solazyme and EnerNOC are both companies with big question marks. They have some really exciting technology on their hands, but there's no way to tell how well their products will be received by the market. Time will tell."
For those who like a safer investment, I asked Alyce if she had to put all her eggs in one basket, whose basket would it be? Alyce had a tough time deciding between two of her holdings. In the end, Whole Foods came in second: "Whole Foods is very visionary and very different than typical grocers and I believe remains ahead of the curve of growing consumer habits."
But the company that won out had a step up on Whole Foods. This company is "just such a fantastic, customer-centric business," Alyce said. It just so happens that The Motley Fool has created a special free report that highlights Alyce's favorite stock. The report, "The Death of Wal-Mart -- The Real Cash Kings Changing the Face of Retail," is available to you, absolutely free of charge. If you want to find out what the stock is, I encourage you to get your copy today!
At the time this article was published
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