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'Good' and 'Bad' Stock Picks

James Altucher

Many investors want to invest "good" in addition to investing well, meaning that they want to hold stocks in companies that are deemed socially responsible and are not involved in industries that violate their religious, moral or ethical beliefs. But other investors have no qualms about investing in companies involved in the manufacture of firearms and other weapons, cigarettes, alcoholic beverages, gambling or whose businesses may violate human rights or damage the environment -- so long as the businesses make money.

Stockpickr tracks portfolios on both ends of the spectrum -- the Vice Fund and the Ave Maria Catholic Values Fund.

Profiting From 'Vice'

First, the "bad." The Vice Fund is a long-term capital growth fund that has generated an average annual return of more than 20% over the last five years. Stocks it owns include Altria Group (MO), which recently spun off cigarette manufacturer Philip Morris International (PM). Altria has a forward price-to-earnings ratio of 11.6 and a P/E-to-growth ratio of 1.3. Philip Morris shares offer a forward P/E of 14 and a PEG of 1.4.

Altria stock is also owned by Moore Capital, a $10 billion group of hedge funds managed by Louis Bacon. Moore also owns shares of Dow Chemical (DOW), which has a forward P/E of 12.6 and a PEG of 0.9, with a yield of 4.2%.

Another stock in the Vice Fund is Diageo (DEO), a worldwide distributor of beer, wine and liquor. The company recently has been issuing press releases touting its support for initiatives to combat drunk driving and underage drinking. The stock has a forward P/E of 15, a PEG of 1.6 and a 2.5% yield.

Diageo is in the portfolio of Tweedy Browne, a $13.5 billion investment partnership that looks for companies trading at a significant discount to intrinsic value. Tweedy Browne also owns shares of Wal-Mart (WMT), which has been subject to criticism due to its labor and business practices, environmental impact and treatment of product suppliers. The stock has a forward P/E of 15, a PEG of 1.4 and a yield of 1.7%.

Profiting From 'Values'

Now lets look at the "good" fund. The Ave Maria Catholic Values Fund invests in companies that do not violate the core values and teachings of the Roman Catholic Church. The fund's performance has put it in the top half of Morningstar funds, having generated an average annual return of 15%-plus over a five-year period.

One of the stocks that Ave Maria owns is Kinetic Concepts (KCI), a wound care and therapeutic products medical technology company. The company just last week reported a 27% jump in first-quarter earnings due to an increase in both domestic and foreign sales. The stock has a forward P/E of 9 and a PEG of 0.8.

Kinetic shares are also owned by Renaissance Technologies, a New York-based hedge fund managed by Jim Simons. Renaissance also owns shares of the non-socially responsible military aircraft manufacturer Lockheed Martin (LMT). Lockheed's first-quarter earnings were up 5.8% on a 7.6% revenue increase. The stock has a forward P/E of 13, a PEG of 1.3 and a yield of 1.6%.

Another Ave Maria stock is Legg Mason (LM), an investment management company and sponsor of mutual funds. The stock has a P/E of 13, a PEG of 1.7 and pays a yield of 1.6%.

Legg Mason stock is also owned by Basso Capital, a $1.1 billion investment firm that was founded in 1994. Basso also holds shares of Clean Harbors (CLHB), a "green" company that provides environmental services. The company, which is set to report quarterly earnings next week, offers a forward P/E of 20 and a PEG of 1.2.

For more "good" and "bad" stock ideas, check out the portfolios of the Ave Maria Catholic Values Fund and the Vice Fund at Stockpickr.com.