The Wall Street Journal reports (subscription required) that "Over 41 years ended 2006, alcohol, tobacco and gambling shares returned about 3.5 percentage points a year more than other stocks, according to a new study slated for publication in the Journal of Financial Economics. Ironically, scrupulous investors might have created the outperformance by shunning such stocks, thereby leaving them available to other investors at bargain prices."

So there you have it: It might be possible to do well by doing good but it's easier to get rich investing in companies that do evil.

Vice stocks generally outperform the broader market during difficult economic times: Demand for cigarettes tends not to be affected by recessions and at least right now, the bad economy is driving gun sales .

However the performance of vice stocks doesn't appear to have held up particularly well over the past year. The Vice Fund recently reported (PDF File) that it was down 42.83% for the year ended March 31st, 2009 -- measurably worse than the category average of 38.13%.

If you believe the pundits who say we are close to emerging from a recession, this is the absolutely worst time to buy sin stocks: Their sales and earnings have been relatively flat during the recession and they're unlikely to get much of a boost from a macroeconomic turnaound.

Plus: You just sleep better owning shares in companies that don't kill people.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"The market is looking increasingly fragile -- and our top pick for 2008 is a stellar investment that has all the makings of a bear-market killer: The Vice Fund (VICEX)," says Eric Roseman, editor of Commodity Trend Alert.

"This fund will do well as long as people continue to drink, smoke and gamble. The fund might not be the most wholesome investment in your portfolio, but it sure earns a big score for making bundles of dough from many industries currently shunned by investors and portfolio managers.

"And best of all, as the economy contracts, stocks in its highly concentrated and aggressive portfolio usually grow their corporate earnings while the broader market corrects. Bull or bear, it doesn't matter. The Vice Fund can generate profits in any economic environment -- provided people continue to gamble, drink and smoke.

"Launched in 2002, the Vice Fund is advised by Mutual Advisors, Inc, a small outfit with $177 million under management. But its size is actually highly advantageous to investors because of its ability to quickly enter and close trades and buy some companies that might be thinly traded.

Saturday's New York Times has an interesting piece on socially responsible investing, and investors who are successfully integrating their values into their investing without sacrificing their returns. While everyone is familiar with standard SRI funds like Paxworld and Parnassus Investments, there are a few really interesting ones that you probably haven't heard of:

Amana Mutual Funds: I'm Jewish, but I'm tempted to convert after taking a look at the jaw-dropping returns achieved by this fund, which screens out stocks that are not consistent with the principles of Islam. For the past 10 years, the Amana Growth Fund has earned an average annual return of 13.13%, compared to 8.42% for the S&P 500. This handily beats the vast majority of mutual funds, earning the company a coveted five-star rating from Morningstar, the leading evaluator of mutual fund performance. So what does Islamic investing mean? Amana won't invest in any company involved with liquor, pornography, gambling, or banks. Why banks? Under Islamic law, the lending or borrowing of money with interest is forbidden. Amana also avoids companies with heavy debt loads because of this. That practice helped the fund get out of Enron stock before the company imploded.

The Vice Fund: This one is the antisocial responsibility fund. They've invested, with tremendous success, in gambling, tobacco, pornography, and guns.

The Ave Maria Catholic Values Fund: This is another very successful fund which invests based on Catholic principles. They don't touch the traditional sin stocks, but also avoid companies that grant marriage benefits to same-sex couples.

So as you can see, values-based investing isn't just about labor practices or the environment. Whatever your values happen to be, there is probably a mutual fund to match them!

An article in the latest issue of Business Week talked about the Blue Fund, a new mutual fund that invests only in companies whose officer or political action committees donate money to the Democratic party. According to a spreadsheet created by co-founder Daniel de Faro Adamson, these companies have outperformed major indexes over the past five years.

I'm skeptical about whether that trend will continue; I just don't see any particular reason that it would. The fund, which owns companies including Google Inc. (NASDAQ:GOOG), Starbucks Corporation (NASDAQ:SBUX), Lehman Brothers Holdings, Inc. (NYSE:LEH), and Costco Wholesale Corp. (NASDAQ:COST). For a fund with large cap holdings, the expense ratio of 1.5% seems high (although a high expense ratio is not uncommon for a new fund. I would look for it to go down as they grow their assets under management). For Democrat-minded investors who want to invest with others who hold their same values, the Blue Fund may be of interest. Check out www.bluefund.com.

Here are some other socially responsible or values-based funds that look interesting:

The Amana Fund (http://www.amanafunds.com/) invests based on Islamic principles, some of which are quite interesting. For example, Muslim law prohibits all practices of money-lending with interest, considering it usury. So the Amana Fund will not invest in banks, and generally avoid business that are highly leveraged. The fund has performed strongly since inception.

The most well-known of the socially responsibly mutual fund is PaxWorld, which does not invest in companies affiliated with weapons, alcohol, or activities that are harmful to the environment. Last year, the company revised its screening criteria to be more proactive. The fund is becoming increasingly active in lobbying management teams for change in business practices.

Then there's The Vice Fund (www.vicefund.com), which is often known as the anti-social responsibility fund. It specializes in gaming, tobacco, alcohol, and weapons. While it may be politically incorrect, the fund has achieved astounding returns in past years.

The Ave Maria Catholic Values Fund (www.avemariafund.com) is a value-values fund. It is a value fund, investing in companies that are cheap based on the price/earnings ratio or other metrics. But it also invests based on Catholic values. The fund does not invest in companies involved in pornography or abortion and also screens out companies that offer benefits to same-sex couples. It has outperformed the S&P 500 by a wide margin since its inception in 2001.

For some, investing in companies that are in line with their values is important. Others, as Jim Cramer would say, are just here to make money. Which are you?