Daniel W. Boone, whose Calvert Social Investment Equity Fund has outperformed the Standard & Poor's 500-stock index for the past five years, buys shares only of U.S. companies with policies that benefit employees and the environment.
"Choosing from a universe of companies that are thinking longer-term and are socially responsible is a great place to be," said Boone, 60, in an interview from his office in Atlanta.
Boone's mutual fund rose at an annual rate of 5.6 percent during the past five years, compared with the 1 percent drop of the S&P 500. It has beaten all but one of 13 socially responsible funds tracked by Bloomberg, buoyed by holdings in companies such as Amgen Inc. The top performer in the socially responsible category was the Calvert New Vision Small Cap Fund, overseen by James Awad, president of Awad Asset Management.
Socially responsible investing is growing as more Americans shun companies involved in the making or marketing of alcohol, tobacco, weapons or gambling. The number of funds that are classified as being socially conscious doubled during the past decade. Assets of the Calvert fund tripled to almost $1 billion since 2000, even as U.S. equities began a three-year decline.
"It's been a gradual trend of growth toward socially responsible investing," said Greg Carlson, an analyst at Morningstar Inc., a Chicago fund research firm. "Over time, investors have seen more evidence that they can find a good to very good fund, particularly in the large-cap space."
Calvert Group, which oversees $9.7 billion for institutions and mutual fund investors, screens for companies with strict corporate-governance practices that promote the environment, product safety and workforce-friendly policies. In July, Calvert said it may stop investing in Aon Corp. because the world's No. 2 insurance brokerage does business in Myanmar, formerly known as Burma, where human rights abuses have been alleged.
The money management firm, based in Bethesda, filed 34 proxy resolutions this year. The proposals included asking energy companies such as EOG Resources Inc. to write standardized reports detailing, among other things, their effect on the environment. Calvert accounted for 10 percent of the resolutions filed this year on social issues, according to the Investor Responsibility Research Center in Washington.
"We're not doing this because we're bleeding-heart, granola-eating people," said Julie Gorte, director of social research at Calvert. "Investors do better when they have more information," she said, adding that regulatory filings don't always disclose enough details.
The Calvert fund is down 2.1 percent this year, with Boone missing the rally in shares of oil companies as crude prices soared. Calvert doesn't invest in major oil companies and refiners because of their effect on the environment.
Energy-related stocks make up 0.7 percent of the Calvert Social Index of 1,000 companies that meet the firm's investment criteria. By contrast, natural gas and oil producers account for 7.4 percent of the S&P 500. Shares of Valero Energy Corp. and Amerada Hess Corp. are among the best performers in the S&P 500 this year, both rising more than 60 percent.
Boone, who has overseen the Calvert fund since September 1998, said shares of oil and natural gas producers probably will stagnate amid expectations that oil prices will decline.
"They may underperform in the next 12 to 18 months," said Boone, whose two holdings in the sector are EOG Resources and Questar Corp. Shares of EOG Resources are up 40 percent this year and Questar has risen 31 percent. "We're not inclined to add to our position," Boone said.
He started his investment career in 1970 as an analyst at Wellington Management Co., working with John Neff, former manager of the Vanguard Windsor Fund. He holds a master's degree in business administration from Wharton School at the University of Pennsylvania.
Boone bought more shares of Amgen, the world's biggest biotechnology company, during the third quarter. He first purchased the stock in the summer of 2002 and it's now the fund's biggest holding, accounting for 3.8 percent of the Calvert fund's assets. Amgen's stock rose at an annual rate of 15 percent during the past two years. It closed Friday at $57.14 per share.
"The news continues to get better about all of its major drugs," said Boone, a managing partner at Atlanta Capital Management LLC.
He expects Amgen's profit to rise at an annual rate of 20 percent for the next three years as sales of Enbrel, a treatment for rheumatoid arthritis, climb and anemia medicine Aranesp gains market share. "You have a very profitable company that is growing very rapidly at a very reasonable valuation," he said.
Shares of Amgen are trading at 26 times last year's earnings, the lowest since July 2002. Drug stocks have been hurt by concerns that Democratic presidential nominee John F. Kerry is pushing to curb increases in pharmaceutical prices by allowing cheaper imports from Canada.
"The stocks have been under an awful lot of political pressure," said Boone, who oversees $9.4 billion for Atlanta Capital. "I personally think that regardless of who is elected, the market will go up."