Parnassus Small-Cap Fund Blends Ethics With Success

This socially screened fund looks for growing firms at cheap prices.

Small-company stocks have been hot of late, but Parnassus Small-Cap Fund (symbol PARSX) has been even hotter. Over the past five years through November 19, Parnassus returned an annualized 8.9%, beating the Russell 2000 index of small-company stocks by an average of 6.0 percentage points per year and its category (stocks of small companies with a blend of growth and value attributes) by an average of 6.4 points per year. Veteran manager Jerome Dodson has done so by investing in small but strong companies that sell at value prices and meet his social screens.

Dodson begins by trying to determine the business value of a company, or what the business is worth regardless of the stock price. If the stock’s market capitalization (price times shares outstanding) is one-third or more below his estimate of the company’s value, he’ll consider adding it to the fund.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance