Socially responsible investing (SRI) has been around for a
while, but it really caught fire a few years ago -- so much
so that it has arguably
become mainstream. What isn't arguable is that it's an
influential force, part of a larger trend that has pushed
companies from
McDonald's (NYSE: MCD) to
Dell (Nasdaq: DELL) to reduce their
ecological footprints and become better citizens.
Nowadays, companies that green up and engage with their
communities tend to attract investors, enhancing shareholder
value. That's great. I'm all in favor of less pollution and
more community engagement, and no matter your politics, I bet
you are, too.
But as an investor, whenever I see a big happy shiny
mainstream trend, I get really curious about the
opportunities on the other side of it, in the dark corners
that nobody's watching.
Why? Because often, the dark side is where the money
is.
When sin can be mighty fine
The types of companies that socially responsible
investors avoid vary, but "sin stocks" -- companies that sell
tobacco or opportunities to gamble, for instance -- are on
most SRI types' no-buy lists. That's too bad for those
investors, because some sin stocks can present fine
opportunities for profits, especially during tough economic
times.
While casino stocks like
Las Vegas Sands (NYSE: LVS) and
Wynn Resorts (Nasdaq: WYNN) have suffered
during the dark days of the downturn -- unemployed folks tend
to forgo weekends in Las Vegas, it seems, and both companies
are making
risky betson big properties in Macau -- there are some
promising opportunities among tobacco stocks.
Where there's smoke, there's often profit
As an ex-smoker myself, I've got some heavy qualms
about investing in tobacco companies. I probably don't need
to recite the arguments against tobacco for you. But I can't
deny the appeal of these companies as by-the-numbers
investments. Tobacco is a high-margin, low-variable-cost
business, and the best-run tobacco companies often sport
solid dividend yields and amazing returns on equity.
Consider:
Stock
CAPS Rating
(Out of 5)
Return on Equity
Dividend Yield
Philip Morris International (NYSE:
PM)
*****
95.2%
4.8%
Reynolds American
****
15.8%
7.5%
Altria Group (NYSE: MO)
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