Can big business clean up corrupt governments in the developing world?

Q: Oil companies have done well in the past year, obviously. But you've been looking at luxury retailers that also do well when gas prices are high.

MG: It's not so much that they do well because [oil] prices are high, but they are more isolated from high prices. Retailers that are more sensitive to the lower end of the consumer spectrum are going to be much more negatively impacted by higher gasoline prices. So we have tended to emphasize the luxury end of the consumer market. An example is Nordstrom. That stock is up more than 15 percent in contrast to Wal-Mart, which is flat to down, or Family Dollar, which is down more than 20 percent.

Q: What other high-end retailers do you like?

MG: A company like MarineMax, which makes boats. Their average selling price is $90,000. [So for] people who are inclined to make that purchase, the extra $10 to $15 a week to fill up their car probably is not going to affect that decision. Whole Foods Market is another great example. Whereas supermarkets in general have been struggling, both because of gas prices as well as competition from Wal-Mart, Whole Foods continues to post just great numbers. Its stock has been a phenomenal performer this year.

Q: Elizabeth, what luxury retailers do you like from a social perspective?

EM: We like Whole Foods, too. We like their products, their focus on organic. They've been attentive to the issue of genetically modified organisms and other concerns that consumers may have. We think Burberry is interesting. They make high-end clothing and have been paying good attention to how they can manage some of the labor issues that you may find throughout the supply chain - things that are related to sweatshops and other unsafe working conditions. We think that Tiffany is interesting. Some of the work they've done on conflict diamonds - trying to avoid purchasing and using diamonds that have been used to fuel civil wars in Africa - has been a really interesting, important stance in that industry.

Q: April rained on Wall Street. May came up roses. What happened?

MG: April was an extremely frustrating month. At Citizens, one of our theses for the first quarter was that earnings were going to come in considerably stronger than what the street was looking for. The street was looking for about 8 percent year-on-year earnings growth. We thought it was going to be closer to 15 percent. As it turned out, the final numbers came in right around 14 percent, so we were pretty correct in our thesis. And yet the markets not only shrugged it off, they actually went down. There were tensions between oil prices and what the Fed was doing. Would the Fed overshoot? Would we go into a recession? Or do we have inflationary concerns? As we rolled into May, though, the market started to digest some of those stronger earnings reports. And you saw some of the companies that had put up good numbers really start to come back pretty strongly in May. We were ready for a bounce.

Q: What's your outlook?

MG: We've had a nice rally in the marketplace. We hope it can continue. And our belief is still that 2005 can be a pretty decent year for investors - probably a lot like '04, not the sort of 25 percent returns you saw in '03. But at the end of the day, [2005 is] probably a decent year.

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