When Bryan Auer owned a health and beauty aids company back in the 1970s, he decided to update his product packaging with new lithographed labels. But he wasn't paying attention to every detail. Before he knew it, his purchasing agent had bought a ten-year supply of packages for Icy Hot, an analgesic that represented less than 0.01% of the company's sales. Auer nearly fired him.

Then something unexpected happened. Hoping to get rid of the boxes upon boxes of Icy Hot, Auer hired an advertising agency to promote the product. The campaign turned out to be a screaming success. The Icy Hot name caught on and annual sales skyrocketed to $10 million, netting Auer a small fortune. It also taught him a valuable lesson: You never know what's going to sell.

"We thought it would be a flop. It sold like hotcakes. We couldn't make it fast enough," says Auer, 73. "It showed us you can't always look at a company and tell how well it's going to do."

Auer's insights, however, led to much more than just a bonanza in the analgesic business. Auer, with the help of his son, took his Icy Hot fortune and built it into a successful growth portfolio.  About 20 years later, the portfolio was converted into a retail mutual fund-the Auer Growth Fund-managed by SB Auer LLC, an investment management team in Indianapolis headed by Auer and his son Robert. In just slightly over a year, the fund's assets have more than quadrupled, to a total of $135 million.

Categorized as a small-cap growth fund by Morningstar, the Auer Growth Fund will delve into the mid- and large-cap sectors if a company has strong growth and a cheap price.

The fund's philosophy, in essence, still has its roots in Auer's early lessons about what it takes for a company to be successful.

"A lot of people say a company will do well if it has good management. But I'll take a dumb manager with a good product that sells well over a Harvard manager who is brilliant but is in a bad business," he says.

Flush with cash from his Icy Hot sales, Auer took his money in January 1987 to Robert, then 25-years old, who was a broker for Dean Witter in Indianapolis, and asked him to invest the money. But Robert had to follow his father's strict instructions. Bryan Auer said he didn't want the firm's stock research, and he didn't want their advice or the advice of his son. He had his own ideas. He wanted the money invested entirely in stocks, and only those with earnings growth of greater than 25%, sales growth of at least 20%, and a price-to-earnings ratio of less than 12. In other words, Robert Auer's mandate was to buy his father only companies aggressively growing and selling cheap. If the company's sales, earnings or stock price fell outside those criteria, they were to be sold immediately. And if the company's stock price doubled, they were also to be sold.

The strategy worked. The senior Auer, who says he always liked playing in the stock market more than doing his 'regular' job, apparently knew what he was doing. Over 20 years, the father-son team turned Bryan Auer's initial $100,000 investment into $20 million. That's because in that time frame, 765 of their stock picks doubled in price.
The returns were so good, some of Auer's friends and associates wanted in. Among them was Bryan Auer's longtime accountant, Scott Read.

"I've been doing (Bryan Auer's) tax returns for ten to 15 years, so I know what he was making, and it was unbelievably successful. I was excited to get in on it," Read says.

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