This interesting BusinessWeek article discussed the Vice Fund (VICEX), which specializes in investing "immoral" industries like gaming, tobacoo, alcohol and defense. The fund sports above S&P 500 returns YTD with little market correlation.
Its MorningStar overview says: "Vice fund seeks long-term growth of capital. The fund is non-diversified. It invests primarily in equity securities of small, medium and large capitalization companies. The fund normally invests at least 80 % of its net assets in companies that derive a minimum of approximately 25 % of their revenues from industries such as tobacco, gambling, defense/weapons and liquor. It may hold up to 20 % of its net assets in cash or similar short-term high-quality debt securities."
I have no hesitation investing in those industries as long as I see value. That's why I invested in RJR, for example. (By the way, RJR has so far treated me quite well.) I do not like "socially responsible investing." Investing is investing and if one wants to besocially responsible he can earn the money out of those vices and make donations to really noble areas.