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Top-Returning Funds That Follow Religious Guidelines


The stocks in the Timothy Plan fund are similar to the holdings in other Westwood-run funds. But for the faith-based portfolio, the managers are barred from buying companies that are involved in "activities contributing to the moral decline of America."

The fund must avoid businesses that produce "anti-family entertainment" or that actively promote abortion and pornography. On its Web site, Timothy Plan provides a list of companies it has refused to own. Stocks in the Web site's "Hall of Shame" include cigarette maker Altria Group (MO), CBS (CBS), and casino operator MGM Resorts (MGM).

Religious screens helped Amana Trust Income excel during the financial crisis. According to Islamic principles, the fund is not permitted to own companies that collect interest. That eliminates financial stocks, some of the worst performers during the market turmoil. Partly because it held no banks or brokers, the Amana fund outdid 99% of its competitors in the downturn of 2008.

Even during periods when financial stocks performed well, Amana Trust Income has delivered competitive results. Portfolio manager Nick Kaiser focuses on rock-solid dividend payers that can grow for years. The portfolio is heavy with consistent blue chips, including Colgate-Palmolive (CL) and Kellogg (K).

Once he buys a stock, Kaiser often holds for a decade or more. He only turns over 3% of his portfolio annually, compared to a figure of 71% for peers.

To limit risk, Kaiser holds cash when stocks look shaky. In 2008, the fund had one third of assets in cash, which helped to damp losses. Lately Kaiser has been finding more bargains, and the fund currently has 7% of assets in cash.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
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