Is it really possible to make money by investing in the stock market and still be true to your personal values and beliefs? American Values Investments is counting on it. AVI is an investment advisory firm that believes corporate profits should come about as a result of good values, rather than in spite of good values. Located in Johnson City, TN, AVI maintains a small portfolio of companies they deem worthy of investment. Companies are required to meet a surprisingly high minimum score on a point system that evaluates their commitment to values shared by Americans.
“Investment merit is secondary to the values merit,” says Carter LeCraw, President and CEO of AVI, of the companies that are chosen for inclusion in their portfolio. That is not to say that those companies are charitable entities that produce no return for investors. AVI is committed to the principle that good business practices produce good profits, and much more. AVI does not simply try to find companies that do no harm, whatever the price. The key is to combine investment potential with ethics.
How does AVI find these companies and what exactly are the values they seek out? Each company that AVI considers must undergo a system of research based on a 300 point system. This research includes a review of all available literature related to the firm, from Securities Exchange Commission filings to newspaper and magazine articles. In addition, AVI conducts interviews with company executives and employees, as well as with customers, vendors and financial analysts. Following this research, AVI evaluates the company based on three different sets of values, each worth up to 100 points.
The Foundational Values score is based on such things as fiscal responsibility, managing style, and the company’s commitment to its mission statement. The Internal Values score considers how well a firm treats the needs of its employees (such as offering child care services and family leave programs), commitment to quality products or services, and teamwork. The External Values score grades the company on environmental issues as well as community and customer relations.
The highest score any company can receive from AVI is 300. So does that mean a company has to bowl a perfect game to merit inclusion into the portfolio? No. In fact, a perfect score is almost an impossibility given the strict enforcement of grading from AVI’s researchers. The minimum score to be considered a viable values-driven company by AVI is 230. Any firm that meets the minimum score gets equal consideration; there is no single factor that immediately earns a company a death penalty.
LeCraw says the company has debated whether there should be any single infraction that overrides all positive attributes, but in the end decided that since perfection cannot exist in the business world, it is unfair to blindly rule out a company that may earn a high overall score just because it engaged in one particular negative business practice.
It is the overall commitment to values that interests LeCraw. And that commitment goes beyond just one individual company or even the entire idea of business in America. LeCraw believes that when both companies and investors put values above profits it helps America. In fact, it is his desire to move the primary question that investors ask themselves away from how much return they are getting to how their investments are helping to build a better America.
Those at American Values Investments don’t just want to help make Americans become better off; they want to help make America become better off. As LeCraw says, “There is something more at stake here than monetary rewards.” What is at stake may very well be the future of investing. AVI is just one of many investment advisors who have staked their claim to socially conscious companies.
This new breed looks at the enterprise of investing from an alternative point of view. For them, as well as for an ever-increasing number of investors, it’s not enough to merely make a monetary profit; there has to be a value profit as well. AVI and other socially responsible investment firms, as well as socially responsible individuals, are beginning to use their clout to demand more from the companies they invest in.
What really separates companies like AVI from less socially engaged investment advisors can be summed up in one of LeCraw’s favorite quotes, from Henry Ford: “The highest use of capital is not to make more money, but to make money do more for the betterment of life.” According to LeCraw, this is not just a slogan to which AVI pays lip service; it is a business model.
Any company AVI declares fit for investing in, therefore, must meet one requirement above all else. It must do its part to make America better. On the AVI web site LeCraw has provided facts and figures to back up his theory that when companies strive to make the world a better place, they make not only their business stronger, but their investors richer.
Since their inceptions over the course of 2004, AVI’s five investment portfolios have experienced positive returns. LeCraw warns, however, that individuals who are concerned primarily with financial performance are not the preferred investor for AVI.
While AVI strives to find companies that combine both values and profits, they are not willing to sacrifice weaker values for stronger profits. In concert with this, investors must also accept that AVI is prepared to accept weak financial returns over the short term from a company that expresses strong principles and is willing to stick by them even in the face of hard times.
Does American Values Investments practice what they preach? AVI is a fee-only company, meaning they do not accept commissions or referral fees from the companies in which they invest. In this way, they assure complete objectivity when it comes to choosing the companies they deem worthy of investment. Further cementing their commitment to integrity is the fact that only thirty companies have made it into AVI’s portfolios.
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