The Peculiarity of Socially Responsible Investing

The Ave Maria Catholic Values Fund, which trades under the symbol AVEMX, is the best example of a socially responsible fund I have encountered. It has been a long-term owner of Lowe’s, which accounts for almost 4% of the overall portfolio, and Lowe’s has dragged the overall performance of the portfolio upward by delivering 17% annual returns over the course of its inclusion in the Ave Maria Funds.

The problem? It hasn’t been enough to keep the pace of a traditional benchmark like the collection of stocks in the S&P 500. In the past year, the S&P 500 has been up 7.4% while Ave Maria has been down 3%. In the past three years, Ave Maria is up 10.3% annually while the S&P 500 has advanced 17.3%. Over the past five years, Ave Maria is up 12% per year while the S&P 500 is up 17% per year, and the ten-year difference is two and a half percentage points: Ave Maria up 5.5% while the S&P 500 has been up almost 8.0% annualized.

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The Expected S&P 500 Returns 2015-2025

A great quote from Leon Cooperman, the founder of the hedge fund Omega Advisors: “I am very knowledgeable and cognizant of what the S&P 500 represents; in 2015, it is an index of 500 companies, on average they are growing about five percent a year, and they yield about two percent, and they trade a little under three times their book value. They have got 35 or 36 percent of debt in their capital structure, and for those financial statistics you pay on average about 18x this year’s earnings. So, as a value investor, I look for either more growth, a lower multiple, or more asset value possibly mixed with more income yield. I want some combination that says Buy Me. My team and I spend all day long, seven days a week, 24/7 trying to look for things that are mispriced in the market.”

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