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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Yum!: Political indigestion

C. HUYGENS - Wednesday, October 30, 2013
Once upon a time, it seemed that Yum! Brands (YUM), Yankee imperialists by almost any other name, were going to win the hearts and minds of the populace of the Middle Kingdom. Fast forward, and the Economist's February 2013 label, "Yucky Kentucky" seems to be taking hold.

The current chapter began about one year ago when a media report on China's national TV station alleged that some poultry farmers in KFC's supply chain violated both Chinese regulations and Yums! supplier terms by doping chickens to speed up their maturation and marketability.

"Toxic chickens!" The Chinese, who've had their fair share of food-associated mortality, apparently shunned the branded products. KFC’s January sales in China fell by a dramatic 41 %. Regulators made recommendations, Yum! took them to heart, and importantly, acknowledged the relationship between its operations and its reputation in its 2013 annual report.

Cultural, geographical and legal distance make it very difficult to first perceive and interpret early warning signals correctly and then to react quickly and appropriately. One spin on the January 2013 fall in sales, and the September 2013 report of a 70% fall in net income, is that Yum!'s reputation in China has been permanently damaged by the affair. The narrative fits the "hero to zero" story and Warren Buffett's adage about losing a reputation in five minutes after a life time of investment.

But solid reputations exhibit resilience, unless...

Yum! doesn’t operate under the usual franchise system in China. It owns most of its stores -- approximately 5000 restaurants in 800 Chinese cities. Yum!'s success provides less local benefits at a time when the domestic economy is struggling. A plausible alternative explanation for Yum!'s woes is more political: the company is being tagged with the stigma of being an imperialist monster that has no respect for the local environment and whose only interest is exploitation of the local market for domestic economic purposes.

Cold war diatribe? Consider last week's accusation by China's state-controlled media that Starbucks Corp (SBUX) charged too much for coffee and that Samsung Electronic Co.'s smartphones don't work properly. Suppose that toxic chickens, or red herrings, are only the tip of the iceberg of regulatory interference -- a heavy handed effort by Chinese authorities to turn around a flagging economy by encouraging domestic consumption.

After 10 years averaging 10.5% growth in the prior decade, China has pared economic growth projections to an average of 7 percent this decade. That's arguably optimistic. Besides a property bubble arising from credit expansion, the entire economy's debt burden is in the same vicinity that preceded crises or sharp slowdowns in Japan and other Asian nations. Even after adjusting for inflation, wages have tripled in the past decade.

According to Bloomberg, "When the U.S.-China Business Council, a Washington-based trade group, surveyed U.S. executives this month, the chief complaints included rising costs and bureaucratic red tape. Almost 70 percent of the more than 100 U.S. firms polled said profit margin would be flat or narrow this year. Only 39 percent are optimistic about the next five years in China; 58 percent felt that way in 2011."

Governments have an uncanny ability to reorient stakeholder expectations. Central bankers have been performing this magic for more than a year with respect to the credit and equity markets. It was not the fire, loss of life, nor oil spill of the Deepwater Horizon that escalated the disaster to the level of the board of directors. Rather, as Carl-Henric Svanberg, Chairman of BP, declared in May 2010, "This has now turned into a reputation matter, a financial squeeze for BP, and a political matter…"

The reputation metrics for Yum! reflect the battle for the hearts and minds of stakeholders, and the power of government to reset those expectations in a heartbeat. The consequences are clear: substantial loss of Reputation Premium from the top percentile among the 65 companies in the restaurants sector to the 70th percentile; and significant confusion in stakeholder expectations evidenced by a top quartile measure of uncertainty - the Consensus Trend -- at 5.2% equaling the two year average level of reputational value uncertainty, the Consenus Benchmark, also now at 5.2%.



For more background on the Consensiv reputation controls, click here. To view the October 2013 reputational value league table at CFO.com, click here.

International Speedway Corp: Talladega daze

C. HUYGENS - Tuesday, October 29, 2013
In an article on the cheating scandal at Richmond International Raceway that rocked NASCAR more than a month ago, Viv Bernstein of the New York Times wrote that the impact "continues to be felt in a sport whose credibility has been questioned by fans, the news media and even its drivers."

For spectators, aka customers, sporting events are for entertainment. For the sponsors, they are bait for spectators. For suppliers, they themselves are customers and for creditors, they are debt servicers. All is well as long as spectators are entertained. As was noted in an article in CFO.com last year with respect to the NFL, much of the entertainment value revolves around notions of fairness - ethical behavior by competitors and quality performances by officials responsible for enforcing ethics.

At Richmond, the race was to set the field for the Sprint Cup playoff. However, the race was manipulated by drivers at Michael Waltrip Racing to try to help Truex qualify at the expense of others. Last week, reports Bernstein, "Michael Waltrip Racing announced it was eliminating 15 percent of its staff, including the No. 56 race team and Martin Truex Jr., a driver at the center of the scandal, who has paid the highest price even though it appears he did nothing wrong."

The reputational value metrics from reputation insurer Steel City Re are sensitive to the aggregate expections of stakeholders. Those expectations comprise NASCAR's current reputation; the behaviors stakeholders take in light of those expectations have economic consequences that comprise NASCAR's reputational value. Seen through the management prism of Consensiv LLC, a licensee of Steel City Re's big data and a provider of reputation value controls whose monthly league table is now published by CFO.com, Bernstein's premise is substantiated.

As one of 52 constituent companies of the Movies/Entertainment sector, International Speedway Corp (a subsidiary of NASCAR) is a reasonable proxy for its parent. The data show that its Reputation Premium has been deteriorating for a few weeks and now stands at the 59th percentile. Over the past few weeks, that deterioration as been accelerating as confusion has slowly been creeping into the expectations of stakeholders, evidenced by a rise in the Consensus Trend to 1.9%.

While the impact is still being felt, however, it is only just beginning to push ISCA's reputational health out of the healthy zone into the less certain zone of caution. The data suggest that while not sanguine, stakeholders expect NASCAR to clean up the mess and will forgive past iniquities. Forgiven and forgotten, as they say, provided events going forward don't expose new scandals. Reputation resilience has its limits.



For more background on the Consensiv reputation controls, click here.

RepuStars 2013 October 28

C. HUYGENS - Monday, October 28, 2013

Weekly Reputation Index Metrics


At the close of trading October 25, 2013, REPUVART and REPUVAR stood at 3677.51 and 3097.29 respectively. Over the past four weeks, the former has changed by 1.95%, while the latter has changed by 1.83%. The benchmark S&P500 Composite Index stood at 1532.79 (31 Dec 2001=1000) and has changed over the past four weeks by 4.02%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 21.63% and 19.14% respectively; the S&P500 Composite Index has changed by 24.63%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 97.63% and 56.18% respectively; the S&P 500 Composite Index has changed by 48.78%.

Other interval changes in the magnitude of the indices are shown below.

Analysis

It is bizarre. London’s real estate market is in a bubble; Hong Kong, too. China’s growth rate is slipping into dangerous territory triggering government action that is making business for all Western firms difficult. As has been the case for the past year, equities responded by jumping even higher to new stratospheric levels. The fear index, the VIX, in turn, is unmoved. And why? Because all this bad news ensures capital will be cheap, equities will be purchased on margin, and the bubble will swell further.

In this perverse environment, REPUSPX’s returns for the trailing twelve months are up at 34.58% for a 10.03% spread over the corresponding return from the S&P500. For the calendar year to date, the returns are at 37.71% for a spread of 17.38% over the corresponding S&P500 return. RepuStars Variety (REPUVAR) increased its spread loss for the year to date to -7.22% on decreased returns of 13.11% for the calendar year and increased returns of 18.57% for the trailing twelve months for a -5.97% spread over the S&P500.

The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), which holds on to first place with returns of 119.80%. Hain Celestial (HAIN) leaps up to second with year-to-date returns of 51.91%. Michael Kors Holdings remains in third with year to date returns of 44.55%. 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 Fusion I-O (FIO) is down further to an awful -50.20% for the year, Royal Gold (RGLD) is up at -33.27, and VeriFone Systems (PAY) is back on the weak sister list with returns of -27.02%.

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.

Background

The 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 on the ticker names 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 Finance

Reputation 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.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

We Stayed for the Show

C. HUYGENS - Wednesday, October 23, 2013
The shenanigans on Capitol Hill follow a plot line so transparent that capital markets are enjoying the Kabuki, not panicking. Investors expect a good show with a happy ending.

As explained in a note by Jonathan Salem Baskin titled, Long-Term Reputation of US Markets Appears Intact, “But investors didn’t panic. The yield on the benchmark 10-year Treasury note was 2.62 percent on Sept. 30, a day before the shutdown began. The prospect of a default should have driven the yield much higher. Instead, the yield barely budged. It never rose above 2.73 percent.”

Read more.

Reputation and the NFL (Roman) II

C. HUYGENS - Monday, October 21, 2013
It is the Monday after a solid weekend of American football that Huygens would like to memorialize with links to two business parables drawn from stories about the league. The first story deals with the relationship between reputation and regulatory opprobrium; the latter, with reputation and entity viability.

It is well known -- in fact, it is black letter law -- that regulators are to consider reputation as a mitigating factor when levying fines for regulatory infractions. the inverse is also true. In a blog posting at Consensiv, Mission Intangible Monthly Briefing moderator Jonathan Salem Baskin explains what this means at a very personal level for Detroit Lions’ defensive tackle Ndamukong Suh who was fined $31,500 for a hit on Cleveland Browns’ quarterback Brandon Weeden, even though it didn’t earn him a penalty flag during the game. Read more.

Notwithstanding its importance to the well being of a large segment of the US population, football is at the end of the day a source of entertainment. Football players, referees, and all that goes with the spectacle is, well, a spectacle. When the entertainment value of that spectacle is placed at risk, significant value is at risk for being destroyed. One way to destroy value is to reshape the expectations of the fans, who, while desperately eager for their favored team to win, expect any victory to emerge from a fairly-refereed game. Last year's lockout of the regular referees placed that expectation at risk, as CFO.com explains. Read more.

RepuStars 2013 October 19

C. HUYGENS - Saturday, October 19, 2013

Weekly Reputation Index Metrics


At the close of trading October 18, 2013, REPUVART and REPUVAR stood at 3708.81 and 3123.66 respectively. Over the past four weeks, the former has changed by 2.01%, while the latter has changed by 1.91%. The benchmark S&P500 Composite Index stood at 1519.49 (31 Dec 2001=1000) and has changed over the past four weeks by 2.02%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 20.82% and 18.35% respectively; the S&P500 Composite Index has changed by 21.72%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 98.36% and 62.04% respectively; the S&P 500 Composite Index has changed by 54.37%.

Other interval changes in the magnitude of the indices are shown below.

Analysis

Kabuki. Confidence that the US would come to a reasonable resolution, notwithstanding the public rhetoric, was evidenced by the uncannily low values of the S&P500 Futures Volatility Index on the CME, aka, the VIX or fear index. Congress did not destroy the world but it succeeded in damaging the US economy just enough to ensure a longer run of quantitative easing – cheap money. As has been the case for the past year, equities responded by jumping even higher to new stratospheric levels. In other words, the bubble expanded a bit more.

In this perverse environment, REPUSPX’s returns for the trailing twelve months are down at 31.79% for a 12.08% spread over the corresponding return from the S&P500. For the calendar year to date, the returns are at 37.13% for a spread of 17.84% over the corresponding S&P500 return. RepuStars Variety (REPUVAR) increased its spread loss for the year to date to -5.21% on increased returns of 14.08% for the calendar year and decreased returns of 16.48% for the trailing twelve months for a -3.23% spread over the S&P500.

The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), which holds on to first place with returns of 117.26%. Wellpoint (WLP) remains in second with year to date returns of 45.69%, and Michael Kors Holdings remains in third with year to date returns of 44.06%. 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 Royal Gold (RGLD) is last at -37.52, Fusion I-O (FIO) is up slightly at -36.11% for the year, and CGG SA (CGG) is back on the weak sister list with returns of -26.89%.

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.

Background

The 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 on the ticker names 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 Finance

Reputation 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.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

CFO Magazine begins Consensiv 50 coverage

C. HUYGENS - Wednesday, October 16, 2013
As a diversity of executives ranging from the board to the risk manager take an interest in increasing, protecting, or restoring reputational value, one executive stands out as a linchpin - the CFO. The CFO reports to the board's audit committee, and usually has the remit for both investor relations and risk management. It is therefore fitting that CFO magazine (CFO.com) begins today coverage of the monthly Consensiv 50 league table, produced by Consensiv, and informed by reputational value metrics from Steel City Re. Link to CFO.com here.

JPMorgan Chase: The limits of reputation resilience

C. HUYGENS - Tuesday, October 15, 2013
A strong reputation among a diversity of stakeholders can sustain a firm for years through thick and thin. Witness the 25-year run enjoyed by Johnson & Johnson (JNJ) after the famed 1982 Tylenol poisoning, and the less famed but much more important 1986 Tylenol poisoning II. Alas, resilience has its limits as Johnson & Johnson discovered in recent years.

Enter JPMorgan Chase (JPM), an integrated bank led by Jamie Dimon, a CEO with rock star-like cult status as a risk manager extraordinaire, who guided his firm through the ugliness of 2008 unscathed. Since the London Whale event hit the news 18 months ago, sturm und drang have played out amongst stakeholders, especially those at the periphery comprising regulators, litigators and mommy bloggers, who have piled on the opprobrium -- and the fines. The New York Times' pithy summary comprises the headline: The Bloodlust of Pundits Swirls Around Jamie Dimon. See cartoon clip starting at 0:56/2:31 - http://www.youtube.com/watch?v=KNCz0-CYj8M

The damage has been incremental, but measurable; the largest U.S. bank by assets, on Friday reported a $380 million loss, or 17 cents per share, in the third quarter on lower revenue and massive legal bills. That compares with net income of $5.7 billion, or $1.40 per share, a year earlier. Excluding litigation expense, the New York financial giant posted a profit of $5.82 billion, or $1.42 per share.

The Steel City Re reputational value metrics reflect the lowered reputation (CRR) ranking (reputation premium) driven by the volatility of stakeholder (RVM Vol) expectations (consensus trend). Wells Fargo (WFC) now enjoys a greater premium and greater return on equity, and lower current volatility. The projections are for Wells Fargo to continue gaining premium value, and for JP Morgan Chase to continue losing.

Boeing: Rough landing

C. HUYGENS - Monday, October 14, 2013
"Any landing you can walk away from," wrote U.S. Army Air Forces photographer Gerald Massie after crash-landing his B17, " is a good one!" What was true in 1944 is true today: the good news is Boeing is walking.

However, the BP-like serial doling of Dreamliner-associated issues has taken its toll, and Boeing has been winged. For the first time in modern history, Japanese national air carriers are opting for the competition.

Mission Intangible Monthly Briefing moderator Jonathan Salem Baskin published this thoughtful essay on innovation risk and its management in Forbes this past Friday. Read more.

The Steel City Re reputation metrics for Boeing show slow progressive value loss in its CRR Rank (Reputation Premium) from the 95th to the 89th percentile over the trailing 12 months. Notwithstanding daily meetings at Boeing hosted by CEO Jim McNerney, and his April 2013 declaration that "the original promise of the 787 is fully intact," the engineering issues have not abated -- the reputational volatility, termed Current RVM Volatility below (or Consensus Trend) evidence this persistent uncertainty. Stakeholders are no longer as confident (see Historic RVM Vol below) that Boeing is (or was) in complete control of its innovation processes.

RepuStars 2013 October 12

C. HUYGENS - Saturday, October 12, 2013

Weekly Reputation Index Metrics


At the close of trading October 11, 2013, REPUVART and REPUVAR stood at 3643.54 and 3068.69 respectively. Over the past four weeks, the former has changed by 0.16%, while the latter has changed by 0.06%. The benchmark S&P500 Composite Index stood at 1483.52 (31 Dec 2001=1000) and has changed over the past four weeks by 0.90%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 20.79% and 18.32% respectively; the S&P500 Composite Index has changed by 19.22%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 105.76% and 58.70% respectively; the S&P 500 Composite Index has changed by 51.13%.

Other interval changes in the magnitude of the indices are shown below.

Analysis

Yawn. The world is transfixed on Washington, DC, and the more likely outcome is that that the US Congress will damage the economy without destroying the world. Goes the theory, according to pundits, is that quantitative easing will persist. It is a perverse logic, but it is the voice of the market and it likes what it is thinking (expecting).

In this perverse environment, REPUSPX’s returns for the trailing twelve months are are up at 38.12% for a 19.25% spread over the corresponding return from the S&P500. For the calendar year to date, the returns are at 40.01% for a spread of 23.55% over the corresponding S&P500 return. RepuStars Variety (REPUVAR) increased its spread loss for the year to date to -4.39% on decreased returns of 12.07% for the calendar year and increased returns of 17.48% for the trailing twelve months for a -1.39% spread over the S&P500.

The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), which holds on to first place with returns of 107.9%. Wellpoint (WLP) remains in second with year to date returns of 49.05%, and Michael Kors Holdings remains in third with year to date returns of 39.54%. 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 Royal Gold (RGLD) is last at -41.85, Fusion I-O (FIO) is up slightly at -37.0.2% for the year, and Veriphone (PAY) is back on the weak sister list with returns of -28.67%.

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.

Background

The 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 on the ticker names 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 Finance

Reputation 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.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

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