How does a pro at socially responsible investing (SRI) pick companies that are both doing good and doing well?
I asked Alyce Lomax, a colleague of mine, who happens to run one of the only real-money, real-time SRI portfolios (which you can follow online, free).
In nearly two years, Alyce’s portfolio of 19 stocks is up 19%. How does she do it?
Like a growing cadre of investors, Lomax connects with the philosophical underpinnings of SRI, but she also seeks to balance that with standard investing metrics.
“As society sees the full cost of traditional business behavior, SRI will be embraced as the single most important lever towards building a better world than the planet has ever seen.”
In picking stocks for her portfolio, Alyce evaluates how expensive a company’s stock is by assessing both its price-to-earnings (P/E) multiple and its “PEG” ratio, which takes into account the company’s expected growth rate.
She’s also looking for companies with rock-solid balance sheets, typically leaving those with big debt loads alone. You can find these factors yourself by checking Yahoo! Finance.
In terms of SRI factors, she says, a company’s annual report can give you a sense of their focus, as can research on websites like the US Social Investment Forum.
Follow along (free) and learn more about SRI, as Alyce manages her real-money portfolio.
LouAnn Lofton is the author of "Warren Buffett Invests Like a Girl", and a contributor to the Motley Fool.