(FORTUNE Magazine) – Donald Hodges likes to put his money where his morals are. His Hodges fund (HDPMX), which he runs from his office in Dallas, isn't a socially responsible fund by definition, but his basic philosophy is, "We will look at any company, anywhere, provided it's moral." His strategy has been highly successful: The no-load fund has gained nearly 12% a year since its inception in 1992 and shot up 80% in 2003. As of early June, its one-and three-year returns ranked in the top 1% of all mid-cap growth funds, according to Morningstar.

What does he mean by "moral"? Hodges, 70, won't do tobacco or alcohol stocks, and don't get him started on executive compensation. Or do: "In 1980, the average executive made 40 times the salary of the average employee," he says. "Today that number is 285 times. That's not good for the system." As you might guess, he is a big fan of Eliot Spitzer; he's less impressed by Michael Eisner, Henry Silverman, and Sandy Weill. "Things really have become more lopsided and abusive," Hodges says. Besides turning in strong profits, Hodges has another reason for his strict moral code: to set a good example. All three of his children work for the fund. Craig, 40, is a co-president; Camille, 44, is COO; and Clark, 37, is in business development.

Hodges grew up in a little Texas Panhandle ranching community called Canadian. He started his career in 1960 with Merrill Lynch in Oklahoma City and served as president of Rauscher Pierce Refsnes (now RBC Dain Rauscher) until he "lost interest in the administrative things." He founded First Dallas Securities in 1989 and started his fund three years later.

He gave us two picks. As a core long-term-growth holding, Hodges likes Starbucks (SBUX, $43). He cited last month's robusto 11% gain in same-store sales and good growth prospects. "They have 7,900 stores now and could grow to 30,000 stores worldwide," he says. One "momentum" prospect he likes is AMX Corp. (AMXC, $11), which makes wireless control panels for home and office use. The company has a new product that can store as many as 900 movies in a server. "It's a very interesting little Texas company," he says. Just like his. --Grainger David