S&P Rank: 3 Stars
Building a Tighter Ship
May 30, 2003 — For investors who adhere to conservative Christian principles and seek to align their spiritual values with their investments, the $8.5-million large-cap Noah Fund (NOAHX) will shun what the Bible shuns.
This year through April 30, the fund has risen 6.4%, versus a gain of 5.6% for the average large-cap growth fund. For the five-year period ended in April, the fund lost 5.6%, versus 4.4% for its peers. Standard & Poor’s upgraded its raking on the portfolio to 3 Stars from 2 in March, 2003.
Founded in May, 1996, by William L. Van Alen Jr., chairman of Polestar Management Company, the portfolio’s day-to-day operations have been directed by John Geewax, a general partner of Philadelphia-based investment advisor, Geewax, Terker & Co., since January 1998.
Van Alen and his advisory board reviews and monitors the universe of large-cap U.S. companies and excludes those deemed to be engaged in “sinful” or “anti-Christian” businesses and practices. He automatically disqualifies companies engaged in the production or distribution of alcohol, tobacco and gambling. In addition, companies with connections to pornography and abortion are rejected in this conservative Christian growth offering. That leaves out most media, entertainment, hospital and drug firms.
“If a hospital provides abortions, they are screened out and are excluded from the fund,” Van Alen said. “If there is a hospital that refrains from abortions, then we would consider them for the fund,” he added. “If they are manufacturing products related to abortion, the fund can not invest in them.” Van Alen, however, will not necessarily exclude companies which donate money to Planned Parenthood, or provide benefits to partners of unmarried or homosexual employees. “This would not concern us, because it is done after the manufacturing/production process,” he noted.
While some other “socially responsible” funds would shun companies that manufacture guns, or are involved in defense or nuclear power, the fund may invest in these areas. In fact, it once held Boeing (BA) in the portfolio. Van Alen explains that gun manufacturers, or defense contractors, are acceptable because “according to the bible, we have the right to defend ourselves.”
In the event that one of the companies in the fund does something to violate Christian-based philosophies, Van Alen would instruct Geewax to eliminate the holding. If Microsoft Corp (MSFT) were to suddenly purchase a casino, for example, it would be out. When AOL merged with media giant Time Warner, the fund had to immediately drop AOL from its portfolio.
Once the offending companies are ferreted out, Geewax is free to invest as he sees fit. As a growth manager, he’s looking for high earnings and revenue growth, or companies that can finance their growth through internal or external means and provide a high return on capital. He especially likes stocks of companies with strong cash flow and low debt that are not too highly levered.