“Market Beaters” Include $15B Socially Responsible Parnassus Fund

Jan 11, 2016 7:00 PM ET

“Market Beaters” Include $15B Socially Responsible Parnassus Fund

Beating the stock market year after year is like winning repeat Super Bowls—it’s dauntingly difficult, but not totally impossible.

To find out which money managers beat the market on a consistent basis, Barron’s, commissioned Morningstar to look for all-star outperformers. The final list of domestic stock funds—those guided by the same manager that beat the S&P 500 Index over longer-term time periods—contained just four names, and one of them was a big surprise.

Parnassus (PARNX), a socially responsible fund, made the cut for this exclusive club. Parnassus shares certain characteristics with the other three: all four winners benefited from a market that has favored growth over the past few years. All own many fewer stocks than the average actively managed fund. And all trade far less than their competitors. But it stands apart for its focus on ethical investing. Jerome Dodson, manager of Parnassus, founded the fund in 1984 with $350,000 borrowed from family and friends. Today, the firm has $15 billion in six funds.

What’s the secret? Dodson looks for companies with good track records on the environment, that also treat people and the community well. He also looks for growth at a reasonable price, evaluating a company’s price/earnings ratio relative to its history. If that sounds like a long view, Dobson says that there is no better time for socially responsible investing than today, and for the foreseeable future.

I’m John Howell for 3BL Media.

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