A. Values Research
1. Screening – find and own only companies with stable, long-term growth records
Our search for and evaluation of companies that reflect biblical values has four main components.
First, Negative Values Screening. We identify and exclude companies that violate the most common concerns of BRI investors, including: tobacco, alcohol, gambling, pornography (adult entertainment), abortion, non-traditional marriage lifestyles, violent entertainment, and embryonic stem cell research. We use the 10-page Corporate Values Survey (PDF) of IW Financial, its extensive and accurate online data on over 3000 companies, its advanced data search technology, and additional information in their extensive notes. This helps us identify and exclude about 10-15% of these companies that violate biblical values.
Second, Positive Values Screening. We rank the companies in descending order of positive values, such as respect for people and the environment. We use the same 10-page Corporate Values Survey of IW Financial to assign high, medium, low or no importance to 16 issues areas. Then we check favor, oppose or not ranked for about 70 values questions.
The quality of IW Financial values data varies. The quality and accuracy of negative data are high. Therefore, we are reasonably confident that violators in the eight biblical areas noted above have been excluded. The quality of positive values data quality is low. It is more difficult to identify companies that demonstrate integrity, giving, excellence, and respect for people. Therefore, we use the IW Financial ranking as a way to prioritize our further search for companies that are likely to reflect biblical values.
Third, Growth / Investment Merit Screening. We seek good stocks so that we can fulfill our stewardship and fiduciary mandates. We high grade this positive values list based on: (1) growth / investment merit, and (2) diversification / economic sector needs.
Fourth, Google Research and Reading. We read annual reports and use Google to evaluate the biblical values of the companies with the best investment merit. We prefer companies that provide essential goods and services. We look for biblical values, including respect for people, excellence of product & service, and respect for the environment. For example, one company slipped through the IW Financial screen, but was excluded because it had a sizable casino financing business.
In 2005, this process produced over 60 biblical values companies with good investment merit in the seven largest of the ten S&P economic sectors. These seven sectors account for over 90% of the S&P 400. This biblical values companies list was a good base for building a diversified portfolio of 24 stocks with prospects for good risk-adjusted return.
In late 2006, we used the same steps to find more mid cap companies that reflected biblical values and upgraded the expected risk-adjusted return, based on MPT data.