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Five Socially Responsible Stocks For August 15
Posted: Aug 15, 2008 12:29 PM by Glenn Curtis
Most individual investors share an obvious, common goal - they want to make money. However, that doesn't mean that making money is the only goal investors want to accomplish. Many investors are concerned with political and ethical issues as well, and spend a good deal of time and resources in pursuit of these more personal goals.
It should come as no surprise then that investors have carved out a niche strategy within the market known as "socially responsible investing", in order to align their political and ethical goals with their economic aspirations. (To learn more, check out Change The World One Investment At A Time.)
What Is A Socially Responsible Investment?
Socially responsible investments will differ for each investor according to his or her convictions. One investor may feel there is nothing wrong with a particular company's line of work or business practices, while another may consider the company entirely unethical. While there is no universal set of characteristics that define a socially responsible stock, there are certain themes that tend to be commonly associated with socially responsible investing.
First off, socially responsible investors typically prefer to avoid making investments in companies that engage in the production or sale of alcoholic beverages, tobacco products, gambling or sports betting activities, adult entertainment, and tools of warfare or violence (guns, bullets, bombs, etc.). (To learn more about these types of investments, read Extreme Socially Responsible Investing and Working With Islamic Finance.)
As well, socially responsible investors typically seek to invest in companies that possess a healthy amount of environmental responsibility and contribute to environmental sustainability, renewable energy and clean technology. (Some companies may try to appear cleaner just to get your money. Find out more in The Green Marketing Machine.)
Social Responsibility, Indexed
While it is of course a subjective decision to label any one company socially responsible or not, the Dow Jones Sustainability United States Index provides investors who are interested in making socially responsible investments an easy way to produce a shortlist of companies that are generally regarded as among the most socially responsible public companies. The index is reviewed quarterly, in order to stay up to date with the changing business environment.
This can be particularly useful for individual investors, since researching all the aspects of a large company's operations and business practices in order to rule out the existence of any socially irresponsible activity can be quite time-consuming. In other words, limiting your investment selections to companies listed on an index such as this will likely not create an investment portfolio that perfectly matches all of your political and ethical concerns, but it will ensure that your investment capital goes into companies that are regarded as socially responsible on average compared to most companies.
Responsible But Still Profitable
Investors, however, don't want to suffer losses on their investments, even if they are socially responsible ones. With that in mind, here are five stocks currently listed on the Dow Jones Sustainability United States Index that have produced positive returns over the past year.
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Company
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52-Week Price Change
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Market Cap
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Amgen (Nasdaq:AMGN)
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29.9%
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68.60 billion
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Gap (NYSE:GPS)
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17.6%
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13.97 billion
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General Mills (NYSE:GIS)
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21.0%
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22.60 billion
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Procter & Gamble (NYSE:PG)
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8.9%
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217.3 billion
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Schlumberger (NYSE:SLB)
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9.6%
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112.63 billion
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Data as of market close August 14, 2008
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Procter & Gamble
I like Procter & Gamble for a couple of reasons. First, the Ohio-based company brings us products that I think we would have trouble living without. They include big name items like Duracell batteries, Bounty paper towels, Charmin toilet paper and Scope mouthwash. I also like the company because it's been around in some form since 1837. It's seen and survived its share of business cycles.
But even more important is that Procter & Gamble is expected to grow. In fact, Wall Street analysts expect the company to earn $4.11 in the current fiscal year and $4.31 a share the following year. And in the next five years it's expected to grow at a 10.5% clip per annum. That's not too shabby for a company of its enormous $200 billion-plus market cap size.
The downside?
The competition in some of its business sectors remains stiff. In addition, although the company makes items that I think we'd have trouble living without, it doesn't mean that those items aren't replaceable or that the company is immune to an economic slowdown.
What do you think of socially responsible investing? Are any of these socially responsible stocks prudent investments? Join in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.
By Glenn Curtis
Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.
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