Beat the System: Meet the quiet Christian money manager who’s comfortably beating the market

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More than 30 years ago, Philadelphia stockbroker Mark Mulholland bought a sandwich for a homeless man and it changed his life.

“He said to me, ‘Whatever you did for one of the least of these brothers of mine you did unto me,’” Mulholland recalls. “Then he said, ‘That is Matthew, 25.’” He pulled a bible out of his pack and showed Mulholland the quote.

It was a revelation to Mulholland.

At the time, he was actively rediscovering the Roman Catholic faith of his youth. “I went to my Church Ministry course that night humbled,” recalls Mulholland, “and glad to see the connectedness of all three parts of the gospel chapter.”

It was all there, he realized: A holistic Christian message on money and work that in which responsibility is directly tied with charity, and hard work with compassion.

‘I believe you make money in the exceptional.’

Shortly after this he decided: If he didn’t become a church deacon, he would start a mutual fund, named after “Matthew 25.”

The Matthew 25 MXXVX, -0.39%  mutual fund is tiny: A mere $350 million at the moment, down from a peak of $906 million in late 2014.

But it’s crushing it.

Matthew 25 is up 34% so far this year—surpassing the S&P 500’s SPX, +0.53%  21% increase. (His fund has also beaten the Dow Jones Industrial Index’s DJIA, +0.50%  15% rise over the same period.)

He’s trounced the 10-year bull market by a wide margin, earning investors a 600% return since March 2009. (The S&P 500 has returned 365%).

FactSet reports he’s beaten the index over 20 years. According to the fund’s latest filings, Matthew 25 has beaten the S&P index by an average of 1.3% a year since it was launched, at the end of 1995. And that’s net of expenses of 1.1% a year.

How did he do it? “I believe you make money in the exceptional,” says Mulholland.

Matthew 25 isn’t a Catholic, “religious” fund, he says. He doesn’t screen investments based on dogma. “Scripture is very, very important, but I’m a big fan of [St Thomas] Aquinas.” Instead, he asks, “Are they operating in an honorable way?”

He was happy to hold Berkshire Hathaway BRK.B, +0.43%  for years, he says, even though Warren Buffett had planned to donate money to Planned Parenthood. “I don’t agree with that part of his long-term plans, but I consider him as one of the most stand-up and noble capitalists,” he says.

Mulholland said he likes “exceptional companies,” and “Rip Van Winkle stocks” that you can buy and hold, even if you slept for 20 years.

“Facebook FB, +0.17% is an exceptional company,” he says of his current holdings. “KKR KKR, -1.10%  has exceptional people. Apple AAPL, +2.05%, I don’t need to describe it. Goldman Sachs GS, -0.47%  is one of the most successful and recognized financial brands in the world.”

He has no magic formula, he says. He selects investments based on quantitative and qualitative measures. “I run the fund as an owner-operator,” he says. He and his wife jointly own 5.5% of the fund. “The problem is, when you have an employee mentality the job is more important to you than the portfolio. I’m trying to be a master craftsman. I don’t know if I’m there.”

One of his biggest investment successes recently: Fannie Mae FNMA, +4.08%  “preferred stocks” (quasi-bonds). They’ve boomed as the mortgage-financing giant has slowly recovered from its financial-crisis woes.

Mulholland has no M.B.A. majored in economics at Lafayette College in Easton, Penn., and follows “the Abraham Lincoln education—read, and learn.” His two favorite investment books are two classics: Ben Graham’s “The Intelligent Investor,” and Philip Fisher’s “Common Stocks And Uncommon Profits.”

‘Every company, like every human being, has a mix of good and bad.’

He’s a member of Opus Dei, the conservative Catholic group, and when I first visited his offices he was just back from a retreat. There’s a bobble-headed Pope Francis on his shelf—a gift, he says, from his sister.

Some may question the integrity or values of some of the companies in which he invests. He says he is more likely to pray for a someone than avoid their stock. “I do believe that every company, like every human being, has a mix of good and bad,” he says.

Yet Mulholland’s faith drives him. As he first discovered from his encounter with the homeless man, he believes Matthew 25 has three messages and they are all connected.

The first lesson, from the Parable of the Wise and Foolish Virgins, is to be prepared “for you know neither the day nor the hour in which the Son of Man is coming.” (The New King James Version.) The second, from the Parable of the Talents, he said is “to fulfill our duties in this life to the best of our abilities.” The third “is to be good to people, and whenever we help those in need it is like helping Jesus Himself.”

Catholics, he says, often have a negative view of wealth. But wealth is fine, so long as you put it to good use. “I sign my letters, ‘Good fortune,’ because if you are able to create a fortune then you should use it for good.”

Mulholland is a capitalist. “I’m not a big believer in central planning,” he says.

But capitalism, he believes, must be combined with ethics. “The golden rule is, do unto others as you would like done unto yourself,” he says. “I don’t care what religion you are. That rule appears in many other religions and cultures, and if that permeated the system that would make capitalism so much better.”

“Capitalism is the best system,” he adds, “but it’s far from perfect.”