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Feel-Good Investing With Real Returns


Inside the Appleseed Fund, which invests in socially responsible companies.

Back in 1995, long before he was a successful mutual fund manager, Adam Strauss spent the spring and summer living out of his pickup truck in Yosemite, where he spent all his time doing what he loved: rock climbing.

Even then, Strauss says, he was actually already fine-tuning the skills he would employ today as a manager of the Appleseed Fund (APPLX), where he and four other pros filter out companies that fail their socially responsible investing (SRI) screens.

"I lived the SRI and value lifestyle," Strauss tells us. "I did everything I could to minimize my impact on the environment while I climbed. And I found a way to live on $12 a day."

Today, Strauss and his colleagues look for companies with strong competitive positions, solid financials, and shareholder-friendly management teams. They're also just as interested in making sure that those companies, as they put it, balance generating profits with an awareness of their effect on the environment and society.

Or, put it this way: If you're a company that derives revenues from the tobacco, alcohol, pornography, gambling, or weapons industries, then this fund isn't interested.

Morningstar research analysts covering APPLX, however, point out that it works for all investors, not just those exclusively concerned with socially responsible stock picking.

Through February 25, the fund's three-year annualized return of 7.20% bests the S&P by 13.87 percentage points and leads its Morningstar peers by 14.71 percentage points, or 99% of its rivals.

Morningstar awards the fund five stars, its highest rating.

APPLX, with $108 million in assets, has an expense ratio of 1.17%, and requires a minimum investment of $2,000.

Recently, we caught up with the 40-year-old Strauss at his office in Chicago, where we chatted about his investment process, top picks, and how he still practices what he preaches as a socially responsible investor in his personal life.

Minyanville: Walk us through your investment process.

Adam Strauss: In order for us to purchase a stock in the fund, it must meet both our sustainability criteria as well as our value criteria. On the sustainability side, we screen out certain industries, and we measure companies for their environmental performance.

Minyanville: On the value side?

Strauss: We try and buy stocks with a fair amount of safety. We look for buy limits that allow us to generate a 50% return to our own independent estimate of intrinsic value.

Minyanville: What is the attraction of the SRI strategy for investors?

First, a lot of investors want to be able to sleep at night with their portfolios. They want to know that they don't own companies that make cigarettes or subsidize the regime in Sudan.
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No positions in stocks mentioned.
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