Muslim Funds Are Rewarded for Their Faith

Muslim funds' aversion to the financial sector largely inoculated them from the mortgage crisis, keeping them healthy as the contagion spread across broad swathes of domestic stock and bond funds.

While the S&P 500 remained up 4.9% for the year through Friday, a number of funds that invest according to the Koran have significantly outperformed the benchmark. The (AMANX Quote - Cramer on AMANX - Stock Picks)Amana Trust Income Fund (AMANX) return of 13.3% through Dec. 21, beating the S&P 500 by 8.4 percentage points, while its sibling, the (AMAGX Quote - Cramer on AMAGX - Stock Picks)Amana Trust Growth Fund (AMAGX), gained 11.7%.

The Amana funds, managed by Saturna Capital of Bellingham, Wash., are also ahead of the S&P 500's annualized return for the past three and five years, earning them five-star ratings from Morningstar.

The Amana Trust Income Fund, with $339 million in assets, posted the fourth highest return this year of large-cap value funds tracked by Morningstar, helped by its large holdings of technology, healthcare, and commodity stocks.

Monem Salam, Amana's deputy portfolio manager, says a lot of the money coming out of financials is entering technology. And Amana has been building this position all year long. Apple(AAPL Quote - Cramer on AAPL - Stock Picks) is the largest holding of the Amana Trust Growth Fund.

"We don't think it's overvalued," says Salam. "They have a lot going for them with new products like the iPhone and a deal with China Mobile(CHL Quote - Cramer on CHL - Stock Picks). There is a halo affect from the iPod and Notebooks. We would buy on 10% pullbacks."

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