Socially responsible investing was a big issue a decade ago. Today, the social niche that’s making news is environmentally responsible investing. Green Century is one of the leading fund families in the niche, so I took a look at the company’s highly rated Balanced Fund for some green stock ideas.
Investing in Green
Bloomberg recently published an article highlighting the emerging acceptance of environmentally friendly investing. This niche isn’t new, the Green Century family of funds has been successfully investing for the betterment of the environment for some time. Although it has two offerings, its Balanced Fund has been the best performer, earning four stars from Morningstar.
Aside from trying to pick stocks that management believes will increase in value, the fund also looks for companies that “demonstrate a commitment to protecting the environment by the products they make or services they provide, including renewable energy” and that “disclose their policies and performance on critical environmental sustainability criteria, such as plans to minimize risks to water, air and public health.” The fund also takes an activist role, pushing companies to be better environmental stewards.
The Top Two
The company’s two largest holdings at the end of the first quarter were Costco Wholesale Corporation (NASDAQ:COST) and Symantec Corporation (NASDAQ:SYMC). Costco Wholesale Corporation (NASDAQ:COST) is an interesting story because in 2010, Green Century helped push the company from being what it describes as an environment “laggard” to a “leader.”
The fund family sponsored a resolution that it says sparked a dialog that led Costco Wholesale Corporation (NASDAQ:COST) to commit to stop selling a dozen seafood species identified as “at great risk.” For those with the environment in mind, that’s pretty compelling. However, it’s much more exciting to look at the company’s financial success.
For example, revenues have gone up in all but one year (2009) over the past decade. The top line is now more than double what it was ten years ago. The same is true of earnings, which increased from around $1.50 a share in 2003 to nearly $3.90 last year. The dividend has been regularly increased, too.
Symantec Corporation (NASDAQ:SYMC), meanwhile, is an IT company known for such products as Norton Antivirus software. So, it probably isn’t too big an environmental threat. However, it is an interesting turnaround play. The company went on an acquisition binge only to wind up with a case of indigestion. The board recently brought in a new CEO who has a solid history of improving corporate performance from stints at General Electric Company (NYSE:GE) and Intuit.
The shares have headed higher on this management shift, but still trade relatively cheaply compared to their historical P/E multiples. Adding to the allure, in addition to bringing in a seasoned manager, the company has also initiated a plan to return value to its shareholders by way of stock buybacks and dividend payments.
The top line has increased in each of the last two years and earnings are solidly in the black. Fiscal 2012 earnings were over a $1.50 a share and more than double 2011’s tally. With a solid position in the hot computer protection industry, the company stands to benefit. If the new CEO can get profit margins from the mid-teens back into the mid-20s, the bottom line could really take off.