One school of thought says socially responsible investing is counterproductive because it lowers your returns.
If you want to change the world: Invest profitably, make the highest returns possible, and then plow your gains into the causes you support.
I’m not unsympathetic to that line of reasoning.
While there are a few industries I just can’t touch, my job is to help you, my readers, make money. So I can only justify socially responsible investing if it adds to the bottom line.
As a trader, I try to keep my emotions in check and stick to the numbers. And for the most part, I keep politics out of my trading.
As an example: When I write about the amazing opportunities I see in renewable energy, it’s because I expect there’s a boatload of money to be made in the trade.
Don’t get me wrong: I love the idea that the companies we buy provide cleaner air and reduce carbon emissions. I want to leave my son a better world than the one I grew up in, just as my parents wanted the same for me.
But altruism only gets you so far.
Well, there’s good news on that front. It turns out that “good” companies are often good stocks.
Have Your Investing Cake … and Eat It Too!
That’s the logic behind the Goldman Sachs JUST U.S. Large Cap Equity ETF (NYSE: JUST).
The JUST ETF is a broad, large-cap ETF that focuses on companies that demonstrate “just” business behavior, at least as measured by JUST Capital.
Just behavior might seem a little subjective, but the index managers boil it down to objective criteria. JUST Capital analyzes every stock in the Russell 1000, going over 145,000 data points across 88 unique metrics such as:
- Worker treatment.
- Customer concerns.
- And environmental impacts.
JUST Capital then assigns each stock a score.
It’s not all that different from what I do in my Stock Power Ratings system, in which I measure every stock in our universe across six major factors, 21 subfactors and 75 specific metrics within those subfactors.
Stocks rated “Bullish” in my system are set to enjoy returns on average that are double that of the market over the course of the following year, and stocks rated “Strong Bullish” in my system are set to provide returns that are triple that of the overall market.
Well, JUST’s returns aren’t quite that good. But they’re still solid.
After eliminating stocks with low scores — i.e. those that rate poorly on worker treatment, customer satisfaction, environmental record, etc. — JUST still managed to match its benchmark’s performance.
Investors were able to invest in “good” companies without sacrificing their returns in the process. I love that!
JUST is designed to be a replacement for a Russell 1000 or S&P 500 index fund, so you’ll see a lot of the same names. The largest holdings are Apple Inc. (Nasdaq: AAPL) and Microsoft Corp. (Nasdaq: MSFT), both of which rate Bullish in my Stock Power Ratings system, with composite scores of 77 and 69 respectively.
JUST ETF's Future
I think it’s likely that over time JUST will end up outperforming standard index funds.
It stands to reason that better companies will do a better job of retaining customers and adapting than their more stubborn peers. Having a buy-and-hold position here could make sense for a long-term portfolio.
But in the end, your returns are going to be in the ballpark of market returns. If you want market-crushing returns, you’re going to need to get a little more specialized.
And that’s what we’re doing in Green Zone Fortunes.
If you want to know why I’m so bullish on the renewable energy mega trend, watch my “Infinite Energy” presentation now.
My four stock recommendations tied to “Infinite Energy” are doing incredible things to make our world a more sustainable place.
But they’re also making early investors a nice chunk of change.
My four picks are averaging 15% gains since March 4 — and that’s amid heightened market volatility.
I expect they will go a lot higher in the months and years to come.
To find out how to gain access to my highest-conviction renewable energy stock recommendations (and more), click here to watch my “Infinite Energy” presentation now.
To good profits,
Adam O’Dell
Chief Investment Strategist