Happy Earth Day! Today marks the 41st anniversary of the birth of the environmental movement, so the Breakout crew figured what better day to focus on some "green" or socially responsible investing ideas.
Socially responsible investing is not a new concept, but it is an evolving strategy that has different meanings to different investors. And the growing number of mutual funds devoted to making a profit from socially responsible investing, sometimes shortened to SRI, use various approaches to do so.
There are few funds in the space that can boast double-digit returns like the five-star Morningstar-rated Gabelli SRI Green Fund (SRIGX). The mid-cap growth fund is up more than 17 percent in 2011, and it has risen over 30 percent from a year ago. In the accompanying video, fund manager John Segrich tells Breakout this success comes from investing in global resources, everything from "energy to agriculture to water, forestry, metals, minerals, infrastructure."
In the video above, you'll hear why there are almost as many stocks that Segrich says to avoid, as there are stocks he likes enough to hold in his fund. He implements a somewhat unusual strategy, with more trading than typically is seen in a mutual fund. It's part of Segrich's approach to investing within a volatile sector that's very sensitive to government spending and subsidies.
Solar stocks used to dominate the green, or more environmentally aware ,investing space. But these days, Segrich says he "likes solar, but not necessarily solar stocks," and would avoid panel makers like First Solar (FSLR). He prefers solar companies "tied to volume" that produce poly-silicon, a raw material used to make panels. His fund owns the international stock GCL-Poly Energy Holdings (3800.HK), but he also recommends the U.S.-based Globe Specialty Metals (GSM).
Segrich is fairly cautious on wind power and says "growth has slowed down globally," mostly due to a softening growth rate in China. As for nuclear, the fund doesn't hold any investments, nor does Segrich sound likely to change this position.
The Next Big Trend
Segrich is bullish on some smart-grid components and says investors should "play the build-out on the grid." His picks in this space include Siemens AG (SI) and Cooper Industries (CBE). He is particularly a proponent of Cooper because the company is also involved in LED lighting, which he believes "will be a very big trend over the next 10 years." However, he's cautious on chip makers due to worries about oversupply, and says to avoid a company like Cree (CREE).
The one real clear theme that Segrich sees successfully evolving is the electric car. While we're still early in the cycle, according to Segrich, he says to avoid battery makers like A123 (AONE), but to consider Polypore (PPO), a company expanding production of a crucial component in batteries.
For more on the five-star fund manager's picks and pans, click the video above.