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Archive for the ‘Resource Stock’ Category

Here are some funds that you might want to look into (I’ll include information on Vanguard’s S&P 500 index fund (VFINX) for comparison):

Fund Expense Ratio Turnover 5-Year Return 10-Year Return Top Holdings Include
Appleseed (APPLX) 0.90% 128% Too new Too new Pfizer (NYSE: PFE), Coca-Cola (NYSE: KO)
Calvert Social Index A (CSXAX)  0.75%* 14% (0.3%) Too new AT&T (NYSE: T), IBM
Pax World Growth (PXWGX)  1.46% 51% 1.3% (1.1%) Qualcomm (Nasdaq: QCOM), Cisco (Nasdaq: CSCO)
Domini Social Equity (DSEFX) 1.15% 9% 0.3% (2.0%) IBM, Amgen
Winslow Green Growth (WGGFX) 1.40% 113% 0.8% Too new First Solar (Nasdaq: FSLR), LSB Industries
Vanguard 500 Index Fund 0.16% 6% 1.2% (0.9%)  

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South Africa: SRI Index Beats Market

The JSE socially responsible investment (SRI) index outperformed the Johannesburg all share index by 5%.  As the world economy navigates the doldrums, many have suggested that SRI strategies are a luxury we can’t afford.  The JSE SRI index is a wake up call!  If an emerging economy, yoked to a small stock exchange and heavy industry, can afford to care about SRI, so can we. 

Created in 2004, the sustainability index is comprised of companies on the JSE that meet the highest social, environmental, and economic standards.  It is the first of its kind in an emerging market, and the first to be launched by an exchange.  The objectives of this management style are summarized by the term “triple bottom line” (TBL). TBL organize SRI objectives into a hierarchy consisting of “people, planet, and profit.” 

When considering the criteria, location, and economic climate, this is a huge achievement for the ethical investing community.  Many onlookers, however, aren’t surprised.  They believe the index’s success reflect a higher SRI exposure (weighted 62%) to resource stocks.  Compared to the SRI index’s 10.8% YTD return, the JSE resource index has reeled in a whopping 28% year to date.  

Resource Stocks: Has the boat left the Harbor?

Along with the energy sector, resource stocks have been one of the few winners of 2008. Unfortunately, current economic indicators suggest resource stocks can no longer offer investors refuge.  Fears are mounting that growing oil prices are slowing world growth and lessening demand for raw materials and resources.  Fund managers are increasing their cash reserves (highest since 2002) and banks are paying more then 8% (normally 6.2-7%) to raise money.

June was the first month this year that saw a net loss (1.5%) in the resource sector.  Is the boat sinking or just adjusting course?  One thing is for sure, an exposure rate of 62% (as in the JSE index) to resources may be too risky considering the times.  At this time, I would not jump onboard.

Bottom Line

Tempting SRI funds should have no more then 40% of assets in the resource sector.  Early 2008 SRI gains may have been riding on the wave of energy speculation.  Regardless, South Africa is setting a high bar for emerging markets.

Copyright © 2008 David van der Roest

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