This article is part of our Rising Star Portfolio series.
The real-money portfolio I'm managing for Fool.com has from its inception focused on stocks that do well by doing good in various ways. Traditionally, socially responsible investing often involved screening out the most egregious "baddies," but today, it's far easier to screen in ethical, socially responsible companies that can turn good profits while returning good to the world.
One solid source of do-good stock ideas is the Ethisphere Institute's annual list of most ethical companies; the 2012 honorees were released last week. Let's take a look at some stock ideas.
Don't sacrifice growth for good
A quick glance at the list yields some familiar names. Whole Foods Market, PepsiCo, Starbucks, Costco, and Waste Management already reside in this portfolio, in fact.
Granted, Ethisphere has awarded its brownie points to a few stocks I wouldn't touch with a 10-foot pole at the moment. As much as I'm trying to screen in for socially responsible factors, I'm also looking for potential growth and positive returns.
Here's an example of a stock I consider an untouchable. Best Buy's
The same goes for Safeway
Although ethical attributes are admirable, we don't have to give up heady growth in sales and profits to have a positive portfolio.
That said, the list contains plenty of interesting possibilities that deserve further research.
Automotive supplier Johnson Controls
Still, nobody's perfect, right? China recently accused Johnson Controls of lead poisoning that struck 49 children in Shanghai. Although Johnson Controls denies the allegations, Shanghai's environmental regulator has pointed to Johnson Controls as a major lead emitter in the region. Obviously, that situation bears watching while weighing Johnson Controls.
These days, banks and financial companies haven't gotten the best rep for their ethical behavior, but here's a U.S. bank that made the list: Old National Bank
In a recent interview, President and CEO Robert Jones said his bank's growth relies on sticking to its "basic strategy, which we are a basic community bank. We focus on raising deposits in our core markets and lending them in those same markets. We are not very sexy, we are not very exotic and we like the spread that comes from that strategy, so we are going to stay to that strategy that we have had for the last seven years."
Doing good, doing well, and well worth watching
I'm not nearly ready to pull the trigger on any of these ideas yet, but they're all appealing for my watchlist. In particular, these would infuse additional industry diversification, all while keeping the ethical philosophy intact in this portfolio. However, any commitment to buy will depend on competitive strength, valuation, and growth possibilities.
Do you have any thoughts on these stocks, or other favorite sustainable or ethical stock ideas? Share them in the comments box below.
Alyce Lomax owns shares of Whole Foods and Starbucks. The Motley Fool owns shares of Starbucks, Waste Management, Amazon.com, Best Buy, Costco, PepsiCo, and Whole Foods. Motley Fool newsletter services have recommended buying shares of PepsiCo, Whole Foods, Starbucks, Waste Management, Amazon.com, and Costco; writing a covered strangle position on Waste Management; writing covered calls on Starbucks; and creating a diagonal call position on PepsiCo. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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