Does Socially Responsible Investing Work? [Tesla Motors Inc, SolarCity Corp, Clean Harbors Inc]

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April 30, 2014 10:50am NYSE:KWT NYSE:TAN

investJay Taylor: It’s a topic on a lot of investors’ minds lately. Does socially responsible investing work?


“Would my retirement account benefit from socially responsible investments instead of investments in oil & natural gas?”

First we have to figure out what “socially responsible investing” really is. Part of the complication here is how one defines “socially responsible.” A case could be made that natural gas companies help us move away from oil and this is of great benefit to society

I prefer to go a step further. Let’s look at some investment opportunities that are actually making society better, not just making is “less bad.”

Tesla Motors (NASDAQ: TSLA) 

Tesla appears to be the first company to make eco-friendly cars cool. Of course, it remains to be seen whether the environmental impact of producing these cars and their high-tech lithium batteries is negated by the long-term use of electric cars. Still, the concept that a car could be charged by solar power and then driven without the use of gasoline is an exciting prospect for society.

Famed entrepreneur Elon Musk is the most high-profile name behind Tesla Motors.

The stock is down almost 14% since the beginning of March but is still up 33% year-to-date and almost 300% over the past year. It’s hard for me to recommend a stock with that kind of recent performance, especially considering that the company isn’t yet making money.  But the future looks bright for this company and I personally own shares of this electric-auto maker.

SolarCity (NASDAQ: SCTY) 

Another brainchild of Elon Musk, SolarCity is engaged in designing, installing and financing solar energy systems to both residential and commercial customers. The company also sells solar power and offers efficiency evaluations and upgrades. This is a company that is helping move our energy use to solar and helping to make our homes and businesses more efficient.

The stock has done really well until the end of February. Shares are down 35% since then. Even with this steep decline, the stock remains up 132% over the past year. News broke yesterday that an executive vice president of SolarCity sold 7,000 shares worth around $420,000.

Shares are down 5% today and news of the insider sale is likely a contributing factor. But $420,000 hardly seems like panic selling, especially considering that the executive still owns 158,777 shares. I think he just gave himself a bonus. Or a Lamborghini.

The recent decline looks like a great place to get into the stock. I used the opportunity to buy shares of Solar City.

Clean Harbors (CLH) 

It’s hard to argue with the idea that Clean Harbors does “good.”

The company is engaged in, among other things, environmental clean up. The stock is up over 5% today after an activist investment fund announced a large new stake in the company.

The company helps clean up from environmental disasters, helps manage hazardous materials for other companies and is used by oil and natural gas companies to mitigate their environmental impact.

The stock is expensive, trading at a price-to-earnings ratio of around 39 and has risen 33% since the end of February but up only 7% for the past year. My advice is to wait on this one as it has a tendency to throw out buying opportunities every few months.

So does socially responsible investing work?

Tesla has returned 937% since its IPO in 2010 but the S&P 500 gained 73% over the same period.

SolarCity shares have climbed 371% since its IPO in late 2012, compared to only 19% gains by the S&P 500.

Clean Harbors shares have also outperformed, rising 162% over the past five years while the S&P 500 has only returned 114%.

Given these results, I think it is safe to say that – when done right – socially responsible investing works and can make you some serious money.

DISCLOSURE: I personally own shares of Tesla Motors and SolarCity.

This article is brought to you courtesy of Jay Taylor from Wyatt Research.


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