Richard Platte Jr., lead manager of the Ave Maria Rising Dividend Fund, has a problem with the premise of our first interview question.
Asked at the 2102 Morningstar Investment Conference in Chicago on Wednesday if socially responsible investing means sacrificing performance for investment scruples, Platte initially ignored the question in order to set the record straight.
“Morally, not socially, responsible investing,” Platte said. “If George Schwartz [CEO of Schwartz Investment Counsel, Ave Maria’s investment advisor] heard you say that, he’s jump to correct it, so I just want to point that out.”
He then noted the fund’s five-star rated, risk-off portfolio that looks for “solid, well-run companies to invest in for the long term."
“About 5% of our Russell 1,000 benchmark is off limits, because those companies invest in areas that are inconsistent with the teachings of the Catholic Church and something with which we disagree,” he explained. “There’s an incremental diminution of return any time you outright ban something like that, but performance is solid nonetheless.”
Banned sectors are what one would think; for example, companies that in any way invest or participate in the promotion of abortion and abortifacient pharmaceuticals, embryonic stem cell research or pornography.
“So an organization like Planned Parenthood wouldn’t make it past our screen,” he added. “We’ve had conversations with company executives where they say, ‘It’s only a very small part of what we do.’ Well, even so, if it's any part of what they do we won’t invest.”
Ave Maria’s Catholic Advisory Board is a who’s who of famous Catholics from the sports, money and political world, including Notre Dame coaching legend Lou Holtz, CNBC host Larry Kudlow, Domino’s Pizza founder Thomas Monaghan and pro-life activist Phyllis Schlafly.
The fund's religious standards are overseen by the board, which is “loyal to the Magisterium of the Roman Catholic Church. Each member is familiar with its basic tenets and core teachings. They meet regularly to review the fund's moral standards and criteria.”
Even though the name of Platte’s fund is the Rising Dividend Fund, Platte said it’s not so much about dividend yield in the traditional sense, rather more about growth.
“Dividend growth is an outward sign of inward quality at a company. Companies that put themselves on a ‘dividend diet,’ meaning they pay a dividend just because they feel they have to, are not doing what they should.”
He also said he and his team avoid so-called “faux dividends,” companies that raise their dividend by something like a penny to look good with analysts, but it’s something that doesn’t do much for the shareholders.
“We look for capital appreciation and dividends, as well as the price to value ratio and, of course, performance,” he noted.
He particularly likes the industrial sector at the moment, especially those companies with a heavy international presence.
As far as his near-term outlook, he said he doesn’t put much faith (said with a straight face) in predictions of a “fiscal cliff” and other dire warnings on the road ahead.
“Politicians will do something; they’ll have to as a true crisis nears,” he concluded. “I’m more interested in them keeping the preferential treatment of dividends in place, for obvious reasons, although they traditionally perform well in really any tax environment.”