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Research from Blue Investment Management found that stocks with “Democratic Values” (note large D) significantly outperform the rest of the stock market. The company even offers investors a Blue Large Cap fund and a Blue Small Cap fund (blue…as in state, get it?).

Color me skeptical. First, as Jane Galt points out, back-testing can show lots of thing, or really, almost anything. I’ve carefully back-tested data and come up with the rule that you should always sell on the 29th year of each century. Hey, it’s a proven strategy.

But my greater concern is the idea that “progressive values” yield business success. Well, it could be. There are certainly lots of left-leaning businesses that I admire. The Sandlers of Golden West Financials or Peter Lewis and Progressive (check out this chart).

But my hunch is that this blue investing theory might be the wrong way around. Progressive values don’t breed success, but success may breed progressive values. To quote one well-known progressive, Willie Sutton: “That’s where the money is.”

Posted by edelfenbein at October 17, 2006 11:14 AM