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
||Active: Sustainable total return
||Passive: Values Index
||Similar to S&P 500
||Similar to S&P 500
||usually less than 1.0
||close to S&P 500
||deviation usually less than S&P 500
||close to S&P 500
||each stock 3-5%
||Low (3-4 stocks average per year)
||Achieve Hero status
||Make room for buy as needed
||Loss of Hero status ASAP
Portfolio statistics from Morningstar
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.