Weekly Reputation Index Metrics
At the close of trading May 10, 2013, REPUVART and REPUVAR stood at 3443.31 and 2921.71 respectively. Over the past four weeks, the former has changed by 5.16%, while the latter has changed by 4.54%. The benchmark S&P500 Composite Index stood at 1422.98 (31 Dec 2001=1000) and has changed over the past four weeks by 2.82%.
Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 24.81% and 22.04% respectively; the S&P500 Composite Index has changed by 20.71%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 64.61% and 56.87% respectively; the S&P 500 Composite Index has changed by 41.35%.
Other interval changes in the magnitude of the indices are shown below.
AnalysisAnother week of froth makes for good headlines for both the S&P500 and the pocket RepuSPX indices. The numbers are good, but there is a nagging concern that equity numbers are being driven more by capitulation – there is no return in debt – than it is for corporate fundamentals absent global fiscal stimulatory policies. The widening gap with non-indexed equities, and the low yield of junk debt, formerly known as high yield debt, are both consistent with this interpretation.
In a demonstration of typical “errors in decision making” as termed by behavioral economists, rational expectations, which are central to assessments of reputational value, are taking a back seat to other competing drivers of stock price. RepuSpx, a portfolio that seeks algorithmically to find the best reputation-linked opportunities among the S&P500 constituent members, continues to benefit from this effect. It is ahead of the market index for the calendar year by 5.5% this week, a slip from last week. Its trailing twelve-month returns of 27.18% are beating the market by 6.87%.
RepuStars, plagued by a few companies that have greatly disappointed stakeholders, is still containing its losses. The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), now in its fourth week at the top ranking with a year-to-date return of 54.76%. Wellpoint Inc (WLP holds onto second place with returns of 28.00% and Bed Bath and Beyond (BBBY) returns to third place with a year-to-date return of 22.72%. These are three of the 19 firms identified by the RepuStars Variety algorithm at the start of the year as value opportunities.
As for those whose reputational value has not panned out so far, there’s been another shakeup. Fusion-IO, whose CEO quit this week, returns to last place; commodities in general are represented by Royal Gold Inc. (RGLD) at -31.12%, and scandal-plagued VeriFone Systems Inc. (PAY) is up a bit at -25.20%.
Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.
BackgroundThe RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR). The RepuStars Variety Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR. Click here for real time quotes.
The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).
The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted 20 Jan 2013.
Reputation, Risk and FinanceReputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:
1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012) or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers.
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow.