Here is our quarterly, expanded edition of American Hero News. It contains:
- American Hero News Article
- Investment Commentary
- Research Update
- Investment Performance as of 12/31/2011
If you have any comments or questions feel free to contact us.
The American Values Team
American Hero Company, ScanSource
January 18, 2012
America is better off because of American Hero Companies like ScanSource (symbol SCSC), a distributor of specialty technology products headquartered in Greenville, South Carolina. Mike Baur, the current CEO, began the company in 1992 with only six employees. Today it has over 1000 employees and annual revenues approaching 3 billion.
Its growth and success are impressive, but it's the values of the company that allowed ScanSource to qualify as an American Hero Company. Scansource has stated core values that include "integrity, innovation, community service, and valuing differences". Stating values is one thing but living them out is another. Our research indicates that these stated values are not mere words.
From a customer standpoint they have made a commitment to ONLY partner with their dealers but never compete. For this reason they refuse to sell directly to end users. This obviously helps to retain a high degree of loyalty from their dealers.
Employees are also valued greatly. Mike Baur maintains an "open door" policy for team members, and, even leads a monthly video-conferenced staff meeting to solicit ideas and suggestions. In an article last April Mr. Baur was quoted as saying, "For ScanSource, a happy, healthy employee is much more productive and will contribute more to our long-term success." From our perspective these appear to be sincere words from a concerned and involved CEO.
ScanSource is very conscious of the community and has even established a charitable foundation that makes contributions to "educational programs, area families, children, and other organizations in need". The company matches contributions from employees to this generous foundation.
We salute the dedicated team at ScanSource. Owning stock in American Hero Companies is a great way investors can support companies like ScanSource which is, in turn, making valuable contributions to their customers, employees, communities and ... America.
Carter LeCraw, CEO
American Values Investments, Inc.
2011 was another year of high volatility. In spite of the political rhetoric and doomsday predictions for the Euro zone, both of which continue, the US economy managed to plug along and domestic stock markets zoomed during the fourth quarter of 2011. The American Hero Portfolios also finished the year well. Standard and Poor's has released a study showing how volatility can be a detriment to long term performance. One strategy to deal with volatility is to take a tactical approach. Tactical approaches include trying to be in the market when it is going up and out when it is going down, to using options as insurance against down markets. In order to be consistent with American Values Investments' approach, it seems appropriate to stick with a more fundamental strategy. A volatility metric (standard deviation) has been added to the regular stock analysis. The above mentioned study indicates stocks with lower standard deviations tend to out perform over the long term.
Historically, Presidential election years have usually been good for stocks. Perhaps all the extra funds for marketing the various candidates helps explain those results, an argument for the tactical approach of being in the market. American Values Investments plans to exercise discipline and stay true to its strategy. During the first quarter individual stocks will continue to be monitored on a regular basis, the economic data will be analyzed for any sector concentration opportunities and models will be rebalanced to equal weight for each stock. Equal weighting allows each Hero (stock) in the model to; participate in performance, incorporates the sell high buy low strategy, reduces over concentration risk. By using a concentrated portfolio, transaction costs are better controlled and it reinforces the philosophy of letting each Hero (stock) participate in the results. The standard of using at least seven of the ten sectors ensures diversification. The rebalancing process will be done toward the end of the first quarter perhaps running into the second quarter. By that time year- end results will be factored into the individual stock rankings and any capital gains in taxable accounts would likely be long term.
Benny Van Huss - Research Analyst
- American Hero Companies beginning of year 126
- Companies considered for Hero designation 153
- Companies gaining American Hero designation 13
- Companies losing Hero designation 14
- Companies receiving annual review 142
- American Hero Companies end of period 125
- Approved American Hero Candidates 54
|Americans Hero Equity||+3.10||+16.45||+3.23||+61.21||N/A|
American Hero Index
Wilshire 5000 Equal Weight
S&P 500 Total Return
- Figures are shown as percentages (%).
- An allowance of 1% per annum for fees and/or expenses has been deducted from both models which reflects an estimate of fees charged by American Values Investments. Most financial advisors will charge additional fees. No fees were deducted from the benchmark return figures.
- The primary benchmark is the Wilshire 5000 Index Equal Weight which contains over 6,500 stocks that trade in the U.S. including issues on the New York Stock Exchange (NYSE), NASDAQ Stock Market, and the American Stock Exchange (AMEX). It is often referred to as the 'Total Market Index' because it covers a wide variety of publicly traded companies. Performance assumes all dividends are reinvested; you cannot invest directly in the index. We use an "equal weighted" index as a benchmark because once each year we adjust all of our holdings so that each individual stock postiion represents an equal dollar amount (or close to an equal dollar amount) of the portfolio.
- We believe the Wilshire 5000 Equal Weight index is a reasonable benchmark on which to evaluate the financial effectiveness of our individual equity selections. The S&P Total Return index is shown to give an idea of how an "equal weighted" strategy might compare to other "cap-weighted" indexes.
- The above figures were computed by a third party, Bridge Portfolio.
- One, three and five year figures are annualized returns. The "since inception" returns are simple total returns.
- The figures are not audited and do not represent performance of individual accounts.
- The performance is based on an investment of $100,000 at inception and includes market appreciation/depreciation and dividends.
- The American Hero Equity Model is a concentrated (20-30 stocks) selected exclusively from the American Hero Universe, equal weighted representing at least 7 of 10 sectors as defined by Standard & Poor's. The stocks can range from small to large and from value to growth as defined by Morningstar. Any sector represented is at least 50% of the S&P 500 weighting and no more than 200%. No stock represents more than 5% of the model at initial purchase. The model is rebalanced annually. The stocks are selected based on a proprietary investment merit analysis based on 10 -15 fundamental matrices.
- The American Hero Index Model consists of the top scoring companies (currently 76) from the American Hero Universe (currently 122). To be included in the American Hero Universe a company must score a minimum (currently 375) out of 500 on a proprietary analysis of the company's corporate culture. The analysis focuses on the four key values of Integrity, Humility, Diligence, and Caring.
- Past performance is no assurance of future results. Investing in equity markets involves risk; you could lose a significant portion or all of your original investment. All recommendations are based on our experience and may or may not have been profitable in the past, now or in the future. These performance figures may not reflect the impact that material economic and market factors might have had on our decision making if we had actually managed clients' accounts.