As a newbie investor, I’ve developed three basic strategies in the year or so that I’ve been following the markets. One strategy involves playing it safe, clipping financial news articles and buying well-researched stocks with strong dividends and relatively stable share prices. The second is driven more by greed and generally involves simply picking up mutual funds with market-beating results over the past five years. The third strategy is much more altruistic. It involves screening stocks for corporate philosophies that embrace principles of sustainability and environmentalism – a strategy I call “enviroinvesting.”
To be fair to myself, I might say that my personal portfolio represents the first two methods of diversification due the fact I don’t really have the investing cash to risk on a philosophy. And in fact the year-to-date results of my “50/50 safe and greedy” IRA are handily doubling the performance of the S&P 500, even after last week’s post-rate hike sell off. But perhaps that sell off, the worst since a similar scare in the first week of March, means it’s time to examine the returns of the kind of investment style I started EnviroInvestors.com to preach.
The site began in December last year as a practical response to Jared Diamond’s apocalyptic social history, “Collapse,” and its warning that ecological devastation will basically make moot all those gains from “emerging markets” stock funds if developing nations and world superpowers don’t turn to more sustainable economic practices. My idea was to join the grassroots shareholder movement to persuade companies that sustainability-focused business practices make good sense on more than a feel-good level. I started out writing about sustainability indexes, environmental awards, and companies like Interface floorcoverings, which has a stated goal of becoming the world leader in sustainable home interior products by 2020.
Considering that self-interest may be a stronger driver than altruism for most investors, I began last month to think I simply needed to go after the next hot stock – the next Berkshire if you will – like everybody else. Then I went back and looked at the results of the pro-environment companies I’d wrote about in the high of my sustainability vision quest.
What I found surprised me.
Most of the companies I’d screened for the Enviroinvestors philosophy – through awards and corporate press releases – have actually done very well. Maybe even better than my 50/50 portfolio.
Let’s take a look:
l The first company I wrote about back in December was Whirlpool (WHR), as the appliance-maker joined the Dow Jones Sustainability World Index. Whirlpool went on to buy Maytag, and its stock is up nearly 6 percent.
l Two days later, I called Novelis (NVL) a “Strong buy for the sustainability-focused investor.” The aluminum recycler is up 33 percent since then.
l I then wrote about buying into Lloyds TSB (LYG) on a tip and after reading its environmental platform. The bank is up 11.8 percent.
l No big news for Interface (IFSIA), but I thought Enviroinvestors.com owed them some play as a leader in a visionary business model that must put them out on a limb sometimes with Wall Street. Maybe I should stop being such a doubting Thomas: Interface is up 45 percent since that post and traded much higher through April.
l Running low on news ending out 2005, I ran analyst John Dorfman’s 2006 picks through the enviroinvestors screen, and liked Devon Energy (DVN) and Schnitzer Steel (SCHN). This year, Devon’s down 4 percent, Schnitzer’s up 26 percent.
l In my first post of 2006, I praised Potlatch (PCH) for a biofuels initiative, but called its $50 price too high for its earnings. The forest-products company is down 31 percent since then.
The site soon joined PETA in talking up Safeway (SWY), which has since dropped 2 percent. Maybe that makes it a better buy – like two of the other companies I adore as a retailer were back then in January. Starbucks (SBUX), up 14 percent; E-Trade (ET) up 12 (good for investors, maybe not for folks like me who don’t get free checks anymore). I recommended shopping at Target (TGT) over Wal-Mart (WMT), and touted Whole Foods’ (WFMI) reusable green bags. Wal-Mart is up 3.5 percent, Target dropped the same, and Whole Foods has had a roller-coaster ride down 5 percent.
Warner Brothers (TWX) helped make “Syriana” carbon neutral, but its stock hasn’t moved much. American companies added to a top 100 sustainability list released at the World Economic Forum in Davos have been a mixed bag. Intel (INTC) is down despite a dividend scheme, and Johnson & Johnson (JNJ) flat, but UPS (UPS) and Bank of America (BAC) are up, 8 and 10 percent.
I pumped Arcadis’ (ARCAF) principles and financials: it’s up nearly 50 percent since late January.
So what have I learned from reviewing the first couple months of my little-followed, pro-environment, investing philosophy? Well, since three of my strongest recommendations – Novelis, Interface and Arcadis – are up 33, 45 and 49 percent in just a few months, maybe altruism does pay.