Interest in ethical investing continues to grow especially as the “pro-social” millennials increasingly become investors in the share market.
What passes as an ethical company for one investor may not be the same for another investor. Ethical investment funds often have holdings in companies such as banks due to their ability to promote positive change.
It depends how you interpret what is ethical but at the moment with the royal commission, it is difficult to put any of the big four banks in that category. Other ethical funds will steer clear of anything that is remotely outside their Environmental, Social and Corporate Governance (ESG) mandate.
Many companies that do meet ESG standards seem to fall outside the large cap companies. Here are a few companies to put on your watch list or buy now for a long-term investment:
Seek Limited (ASX: SEK), a mid cap stock, is involved in the recruitment industry locally and internationally. 1H18 adjusted net profit was up over 20% on 1H17. The share price has performed well, up 15.5% in one year reaching a high of $21 in March, now trading at $19.35. The forward PE ratio is on the high side at 32.2 but I think it offers a long-term investment opportunity (see Fool.com.au).
Iress Ltd (ASX: IRE), a mid cap stock, is a financial servcies business. It reported a lower profit result due to higher costs attributed by the company to acquired businesses, an increase in recruitment and higher wages. Trading on a forward PE ratio of 27.4 based on forecast earnings growth of 20%, the company is not inexpensive but is worth watching for future price dips before buying.
Capitol Heath Ltd (ASX: CAJ) provides facilities and diagnostic imaging services to the Australian healthcare market. It is a small cap with a market cap of $230 million. The share price is up 73% for the year to $0.34 cents, trading on a forward PER of 33x. As mentioned in Fool.com.au recently the company has been re-rated by Credit Suisse and may be ready for another upward run.
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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia has recommended IRESS Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.