Thursday, July 27th, 2017

Investment Portfolios for you

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American Hero Portfolios

There are two American Hero Portfolios in which you can invest with minimums as low as $5,000. Each portfolio contains a group of stocks of American Hero Companies; those companies that best reflect the American values of integriy, caring and courage. Below is more information about each portfolio.

American Hero Equity Porfolio

This portfolio is a concentrated portfolio of 20 to 33 stocks from the American Hero Company Universe. These stocks are selected based on our proprietary fundamental analysis which uses over 15 different metrics. The stocks are similar or equal weighted allowing for all to participate in returns and prevents over concentration. At least 60% sectors of the S&P 500 are represented with no one sector over 25% or its respective S&P weight which ever is larger. Turnover is normally less than 50%. The stocks are rebalanced annually. The inception date of the American Hero Equity Portfolio is 4/30/2004.

American Hero Index

This portfolio is an equal weighted group of all* the American Hero Companies. It is rebalanced annually and new heroes are added quarterly. A company losing Hero status is immediately removed from the portfolio and new Heroes are added promptly. Normally, this portfolio contains between 80 and 100 stocks.

Below is a quick comparison table of some of the key components of each portfolio.

  ​American Hero Equity American Hero Index
Strategy Active: Sustainable total return Passive: Values Index
Style Multi-cap blend Multi-cap blend
Diversification Similar to S&P 500 Similar to S&P 500
Beta usually less than 1.0 close to S&P 500
Standard deviation usually less than S&P 500 close to S&P 500
Concentration each stock 3-5%  equal weight 
Turnover Low (3-4 stocks average per year)  
Buy Investment merit Achieve Hero status
Sell Make room for buy as needed Loss of Hero status ASAP
Rebalance Annual  Annual 

Portfolio statistics from Morningstar

As of 6/30/2017

Year-to-date 1 year 3 years (anual) 5 years (annual) 10 years (annual)
American Hero Equity 6.80 11.32 8.74 11.38 6.87
American Hero Index 4.11 15.03 6.68 11.75 see note 11
Wilshire 500 Equal Weight Index 5.88 21.76 5.53 13.62 7.09
S&P 500 Index 9.34 17.90 9.61 14.63 7.18
Dow Jones Index 9.35 21.12 11.01 13.45 7.57


Disclaimers

  1. Our primary goal is not investment performance but to help investors build a brighter America. We limit ourselves to investing only in American Hero Company stocks which make up a very small segment of the market. There are many other stocks which have better prospective investment merit but are not considered for our portfolios.
  2. Figures are shown as percentages (%).
  3. An allowance of .6% per annum (60 basis points) 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.
  4. 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 position represents an equal dollar amount (or close to an equal dollar amount) of the portfolio.
  5. 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 500 Total Return Index is shown to give an idea of how an "equal weighted" strategy might compare to some of the more traditional "cap weighted" indexes.
  6. The above figures were computed by a third party, Bridge Portfolio. They reflect the performance of our models which is not necessarily the composite performance of all accounts invested in these models.
  7. One, three and five year figures are annual percentage returns. The "since inception" returns are simple, cumulative returns.
  8. The figures are not audited and do not represent performance of individual accounts.
  9. 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.
  10. The American Hero Index Model consists of the total American Hero Company Universe of 100-125 public companies. To be included in the American Hero Universe a company must score a minimum 400 out of 500 on a proprietary analysis of the company's corporate culture. The analysis focuses on the three key values of Integrity, Caring and Courage.
  11. As of yet, there is not a 10 year history for the American Hero Index Portfolio. But, the simple accumulative performance from the inception date of 12/31/2009 is 137.03%. Corresponding benchmark returns were Wilshire 5000 Equal Weight 127.48%, S&P 500 Total Return 154.60%, and the Dow Jones Industrials 145.47%.
  12. 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' account.

Risk Management

All investments in all asset classes are subject to risks including the risk of losing value. Risk can be managed but cannot be eliminated. Overall risk is managed by spreading the risk over more than one asset class also known as asset allocation. Risk can be further managed within each asset class of which equity investments is one. American Values Investments manages equity risk by:

1. Investing in American Hero Companies only. We believe that companies that hold themselves to a high level of ethical standards are likely to perform well relative to the market, especially during challenging times.

2. Analyzing fundamentals to determine investment merit. We believe that companies that consistently exhibit good fundamentals tend to also perform well relative to the market and manage difficult situations well. Our in house analysis uses over twelve different metrics. Companies that maintain strong fundamentals are less likely to be replaced, thus the turnover is low which means fewer trading costs.

3. Reviewing third party analysis for checks and balances. We use reports from Standard and Poore’s, Morningstar, and Argus; none of which sell investment products. This process assists with minimizing emotional biases.

4. Diversifying across several sectors of the market. We intend to have at least 60% sectors represented in the managed portfolio. Those sectors represented will have a maximum of 25% or their respective allocation in the S&P 500 which ever is higher.

5. Watching macroeconomic indicators. We want our sector weightings to be determined by fundamentals rather than momentum.

6. Concentrating on twenty to thirty three individual stocks. Modern Portfolio Theory state that adequate diversification can be achieved with ten to twelve stocks. Having thirty stocks or less guards against over concentration and makes regular monitoring manageable. Limiting the number of positions usually translates into lower trading costs.

7. Monitoring stocks on a regular basis. The investment merit is reviewed on a monthly basis. Alerts for news and company announcements are set for all current holdings. Quarterly earnings presentations are observed for all current holdings.

8. 3-5% weighting. Each stock will have a maximum of five percent concentration thus limiting the negative impact on overall performance. 3-5% weighting also protects against emotional biases.

9. Rebalancing regularly. Rebalancing not only prevents over concentration it enforces a ‘buy low sell high’ discipline. Our goal is to rebalance annually with the rebalance date being at least three hundred sixty six days after the previous rebalance, thus keeping tax consequences lower.

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