Most individual investors share an obvious, common goal - they want to make money. That doesn't mean, however, that making money is the only goal investors want to accomplish. Many investors are concerned with political and ethical issues as well, and they 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" to align their political and ethical goals with their economic aspirations. (To learn more, check out Change The World One Investment At A Time.)
Social Responsibility, Indexed
While it is of course a subjective decision to label any one company socially responsible, the Sustainable Business 20 (SB20) list and the Dow Jones Sustainability United States Index provide investors an easy way to produce a shortlist of companies that are generally regarded as the most socially responsible public companies. The Dow Jones Sustainability index is reviewed quarterly, and the SB20 is updated yearly in order to stay up to date with the changing business environment.
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, so these indexes are a great resource. Limiting your investment selections to companies listed on an index such as these 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 compared to most companies. (Some companies may try to appear cleaner just to get your money. Find out more in The Green Marketing Machine.)
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 on the Sustainable Business 20, released on July 17, 2008. Four of these have produced positive returns over the past year.
| Company |
12-Month Price Change |
Market Cap |
First Solar
(Nasdaq:FSLR) |
154% |
$22.2B |
Lindsay
(NYSE:LNN) |
103% |
$1.0B |
IBM
(NYSE:IBM) |
16.2% |
$178B |
WaterFurnace Renewable Energy
(TSE:WFI.TO) |
2.30% |
$326M |
Google
(Nasdaq:GOOG) |
-11.5% |
$153B |
How the SB20 works
The Sustainable Business 20 are selected yearly by a panel of judges with experience in analyzing sustainable stocks. The list attempts to identify innovative and progressive companies which have the potential to positively impact the goal of a sustainable society. The company must be exciting and excel in solving social or environmental problems and must be profitable (or close to it) and have a stock trading over $1.00.
Closer Look at Lindsay
Lindsay manufactures irrigation systems for agricultural use and construction machinery. The irrigation machinery primarily helps control water, chemical, and fertilizer distribution for farmers. Its infrastructure segment creates equipment for creating and maintaining roads and transportation in cities and highways.
Lindsay Corp. released its quarterly reports in mid-June for the three-month period ending May 31, 2008. Revenue went up 54% over the same period in 2007 to $143 million. Net income didn't quite double (as expected by consensus estimates) but did jump from $7.5 million to $14.1 million. That created a diluted earnings per share of $1.15, up from 62 cents. Equipment stocks like Lindsay are heavily exposed to rising steel prices which created pressure on their bottom line.
Although Lindsay missed estimates, net income is still way up. To put this year in perspective, in nine months Lindsay Corporation has higher sales and earnings than in all of fiscal 2007.
Is it a good price?
Lindsay's trailing P/E ratio is around 33 while the industry is around 13, so it's a little over priced, but not over the top. The forward P/E of 21 looks a little better. Recently the stock price took a hit, dropping from more than $120 in mid-June to to hover around its July 3 closing price of 78.04. Over the last week Lindsay gained more than 10%.
You Can't Survive on Good Feelings Alone
Investors put their money in companies that will generate the most wealth. Sometimes these corporations conduct business in a way that not only generates income but also looks to solve social and environmental problems, or at least not make them worse. These stocks might give you the best of both worlds.
What do you think of socially responsible investing, and of Lindsay Corporation's prospects going forward? Join me (PeterAB) in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.
To learn more about two new types of SRI investments, read Extreme Socially Responsible Investing and Working With Islamic Finance.
