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Can Naughty Companies Be Good Investments?

James Altucher

Back in 2001, Mother Jones magazine published an article called "Ten Worst Corporations of 2000." Investors may not agree with that assessment.

The article actually derided the 13 worst corporate citizens, in its view. But if you had invested in those stocks six years ago, you would have more than doubled your money, receiving an averaged annualized return of 13.98%. As a matter of fact, every stock on the list is up, except for Ford Motor(F). We have put together a portfolio of the entire list of "worst" stocks on Stockpickr.com.

Vice stocks are a critical part of diversification in an environment with rising interest rates and a slowing economy. Let's face it, when times are tough what are you going to do? Drink, smoke and go to movies.

British American Tobacco(BTI) was on the list because, according to the article, they were involved in a worldwide cigarette smuggling scheme. The article cited information found by the International Consortium of Investigative Journalists and the group Action on Smoking and Health. The stock is up almost 500% since the article first appeared, an average annualized return of 31.5%. The stock currently has a P/E of 17 with a yield of 4.9%.

This is one of the holdings of the Vice Fund, which holds a lot of other good "bad" companies. The fund invests 80% of its assets in companies that are considered "socially irresponsible," and has had an average annual return of 18.7% for the last three years. Other components of the Vice Fund include Altria(MO), Boeing(BA) and Wynn Resorts(WYNN).

To watch Gregg Greenberg's video take of this column, click here.

Lockheed Martin(LMT) is another stock on Mother Jones' list that has performed well. The company hired a university to conduct the first large-scale tests of a toxic drinking water contaminant on human subjects, according to a Los Angeles Times article. The stock is up 19.34% per year since the article came out.

The stock is in the portfolio of Schwab Core Equity Fund, which has outperformed the S&P 500 during the last three- and five-year periods. It is managed by Jeff Mortimer, who was profiled in a year-end Barron's article.

To view Aaron Task's recent interview with Jeff Mortimer for TheStreet.com TV, please click here.

Next on the list is Titan International(TWI). The company, which manufactures wheels and tires for construction vehicles, denied bargaining information to the union, according to the Mother Jones article.

The stock has a forward P/E of 20 and pays a tiny yield of 0.1%. The stock is a holding of Jana Partners, a $5 billion San Francisco-based activist fund with an average annual return of 24.5%. Definitely something to consider.

So while these companies may be "bad" in the eyes of society, they certainly have been good to investors.

The entire list of 'worst' stocks can be found at Stockpickr.com.