'Good' and 'Bad' Stock Picks

The Vice Fund and the Ave Maria Catholic Values Fund represent two ends of the socially aware stock investor.
By James Altucher ,

Updated from 9:14 a.m. EDT

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) - Get Report

, which recently spun off cigarette manufacturer

Philip Morris International

(PM) - Get Report

. 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) - Get Report

, 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) - Get Report

, 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) - Get Report

, 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) - Get Report

. 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) - Get Report

, 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.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of

Stockpickr

LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the

Financial Times

and the author of

Trade Like a Hedge Fund

,

Trade Like Warren Buffett

and

SuperCa$h

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

click here

to send him an email.

TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.

Loading ...