Azzad Ethical Fund’s Investment Process
- Prequalification: The investment process begins by filtering companies for compliance with our ethical investment philosophy and targeted market capitalization preferences. We favor investments in companies whose market capitalization is between $2 and $15 billion. We include international companies located in emerging and developing countries trading on U.S. stock exchanges through American Depository Receipts (“ADRs”).
- Quantitative Analysis: Using a proprietary screening process, we screen and rank the remaining companies for various metrics that have historically served as accurate predictors for a stock’s future success. This quantitative discipline measures and ranks stocks according to fundamental characteristics such as: relative price to earnings, cash flow yield, relative strength and low debt. Companies at the upper percentiles move onto our next step for more in-depth coverage.
- Fundamental Analysis: The purpose of our fundamental analysis is to understand a company’s business model and assess its future growth potential. We favor companies with quality products or services in growing industries, a distinctive competitive advantage, quality management and conservative financial practices.
- Stock Selection & Portfolio Construction: In constructing the Fund’s portfolio, we use a top-down investment approach. We don’t try to mimic an index’s allocation. Instead, we use our macro-economic research to identify an appropriate diversification strategy that we believe will enhance the fund’s performance. We then construct our portfolio with candidates that we’ve identified from our quantitative and fundamental analysis.
- Azzad Ethical Fund
- Investment Committee Oversight
- Maximum 20% in non-U.S. companies traded on U.S. exchanges*
- Typically less than 25% industry exposure*
- Maximum position size 5%*
*Limitations apply at the time of purchase.
Our Sell Discipline: We typically sell a position when one or more of the following develops:
- The company’s share is approaching or has reached our target price.
- A more attractive opportunity arises.
- The company is no longer in compliance with our ethical investment philosophy.
- One or more red flags that trigger a loss of confidence in the company to sustain its growth.
- Deteriorating fundamentals.