MISSION INTANGIBLE

M:I Products

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.

Read future M:I posts via RSS RSS

Microsoft: The big yawn

C. HUYGENS - Friday, April 12, 2013
While Apple (AAPL) has given its shareholders, and more broadly its stakeholders, an exhilarating roller coaster ride,  Microsoft (MSFT) has been plodding along. Its not exciting anyone. Its not really disappointing anyone. Its just lumbering along. Which is great for a utility or an oil company or even a giant pharmaceutical, but its not the sort of thing technology companies are supposed to do.

Jonathan Salem Baskin, who moderates the Society's Mission Intangible Monthly Briefing, wrote this week in Forbes magazine, "Can Microsoft maintain its holding pattern going forward? Again, there’s no crime in being consistently unremarkable, and Microsoft makes money hand over fist. But its reputation — the intangible value it gets from its stakeholders — seems stuck in the mud. And if there’s one thing I’ve learned over the years, it’s that reputations aren’t static, they’re earned anew every day. Performing down to expectations isn’t a value-add strategy, and it leaves open the room for other businesses to grab the reputation high ground, or market conditions to ultimately pass you by."

The Steel City Re Reputational Value Metrics, described further in the book, Reputation, Stock Price and You, are measures of reputational value and ranking. The former is represented by the RVM and is expressed in Gerken Units; the latter is expressed in percentile units. To Mr. Baskin's point, the one-year historical RVM volatility is only in the 10th percentile of the peer group, and while the current RVM volatility is above the group median, the company's ranking, the CRR, has actually drifted downward slightly over the trailing twelve months from aroun the 77th percentile to the 72nd percentile. On the bright side, indicators of change show expectations of some transition with a greater than even probability. Still, given that this was a year Microsoft was expected to "wow" the market, the silence associated with the company's reputational volatility is deafening.



Program - 19 April 2013 - Register Now

C. HUYGENS - Thursday, April 11, 2013

Briefing Friday 19 April at 10h00 ET

Program: Grass is Not Always Greener: Less Intangible Asset Value in Russia


The expectations held by the New York and London markets have created companies with enormous value and tiny balance sheets. We take these truths to be self evident: that intangible assets rule. Careful econometric research, however finds contrarian examples on the Russian Trading System. There, the fundamental value of tangible assets is the primary driver of market value.

Joining our conversation are Tatiana A. Garanina, Senior Lecturer, Department of Finance and Accounting, Saint-Petersburg State University, Russia; and Jonathan Low, a Partner in Predictiv, a consulting firm specializing in the valuation of intangibles, and a member of the Society's Reputation Leadership Council. Jonathan Salem Baskin,  author of Tell the Truth, moderates. Learn more.

It's free. Register now.

JCPenny: Into the valley of death

C. HUYGENS - Tuesday, April 09, 2013
Ron Johnson's semi-suicidal charge ended badly for him. Unlike most of the troops of Alfred, Lordy Tennyson's poem, however Johnson will get to leave the JCPenny (JCP) field of combat alive with only the remnants of his 2012 compensation package, about $1.9 million or a cut of nearly 97 percent, and no sizeable stock award and no bonuses. As if this wasn't in the cards a few weeks ago? Hopefully, he is getting a better return on his 2011 signing bonus of $53.3 million than did his Board of Directors.

JP Morgan Chase: Authentic

C. HUYGENS - Monday, April 08, 2013
A meat-product snack called Slim Jim took pride in its two classes of followers: haters and lovers. The haters could be dismissed as long as there were enough lovers finding value in the product.

JPMorgan Chase (JPM) may be the banking equivalent. There is no shortage of governance executives and proxy advisors who have strong concerns about the fact that Jamie Dimon holds titles as both CEO and his own boss, Chairman of the Board. They're pushing for a split. Others see a Karmic injustice in the ability of Mr. Dimon to weather the consequences of the London Whale event and its multi-billion dollar loss without nary a scratch.

Other stakeholders have spoken through more economically compelling actions. Creditors are offering superior terms, equity value is high, and customers may have pushed the bank past Goldman Sachs on the M&A Value league table. Employees have love, too, and while the effects are transparent on the P&L, it's nice to know why.

Consider the bank's response to Super Storrm Sandy. CFO's Caroline McDonald writes, "Unlike many companies, faced with closed branch banks when people needed access, Chase chose not to passively wait for employees to get back to work whenever they could. The company provided transportation to pick up employees and take them to work, according to the employee I spoke to. The company also provided them with food, and those who had no home to go back to were put up in hotels, she said. This was all corroborated by a Chase spokesperson. The list went on and on, including taking care of children whose schools were closed through its backup childcare program, and helping employees find automobiles when theirs were destroyed."

What about the objective measures of reputational value from Steel City Re, and how is the growing horde calling for changes in Mr. Dimon's status affecting reputational value volatility? The short answer is not much. Relative to its 50 peers, JPM's ranking is in the 90th percentile. Its RVM volatility, a measure of uncertainty, is at the 15th percentile with an absolute measurement of around 1.5%. All indicators of reputational value stability are at top levels, suggesting that change is not expected. Which is not necessarily good if the proxy advisors get their way on principle - expect a major loss of equity value in the uncertainty that would follow.

RepuStars 2013 April 7

C. HUYGENS - Monday, April 08, 2013

Weekly Reputation Index Metrics


At the close of trading April 5, 2013, REPUVART and REPUVAR stood at 3226.77 and 2754.31 respectively. Over the past four weeks, the former has changed by -1.23%, while the latter has changed by -1.32%. The benchmark S&P500 Composite Index stood at 1352.94 (31 Dec 2001=1000) and has changed over the past four weeks by 0.14%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 14.89% and 12.99% respectively; the S&P500 Composite Index has changed by 11.10%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 52.38% and 45.78% respectively; the S&P 500 Composite Index has changed by 30.59%.

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

Analysis

Economic news remains mixed with leading indicators showing reversals and lagging indicators showing growth. Much of the world’s economic future rests on the decisions of the world’s central bankers while the politicians who “govern” them are struggling to find common purpose.

In this setting, it is still not clear what constitutes rational expectations. The S&P500, for example, appears to riding a wave of momentum. RepuSpx, which seeks algorithmically to find the best opportunities in the S&P500, moved ahead of the market index for the calendar year. Its trailing twelve-month returns of 23.15% are beating the market by 12.05%.

RepuStars, plagued by scandal-ridden companies, is containing its losses. The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), new the to top rankings with a year-to-date return of 20.81%. Lamar Advertising Co (LAMR) slips to second place with a return of 16.73%. WellPoint, Inc. is also new to the top ranks with a year-to-date return of 14.67%. 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, the greatest disappointments this year are scandal-plagued VeriFone Systems Inc. (PAY) at -33.6%; Apple Inc.-linked Fusion-IO, Inc. (FIO) at -32.8%. and France-based Compagnie Generale de Gephysqu Vrts SA at -26.99%.

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 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 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

Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of The McGraw-Hill Companies, Inc. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). “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 Dow Jones Indices LLC, Dow Jones, S&P and their respective affiliates (“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 S&P Dow Jones Indices 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.

WMT v. TGT: Spring 2013 Edition

C. HUYGENS - Tuesday, April 02, 2013
It's time to review Huygens' favorite retail rivalry. Previously, six weeks ago, Walmart (WMT) made the news as leaked emails suggested management was concerned about awful sales. It was not the economy, although it provided good cover. It was further evidence of a looming reputational crisis.

A reputational crisis, as readers of Reputation, Stock Price and You well know, is a business condition when a plurality of stakeholders reassess their relationship with a company and act with economic force in a way that punishes a company. Customers stop buying, price premiums drop, employees work less efficiently for higher labor costs, suppliers charge more or otherwise reduce a company's priority, credit costs rise, etc.

Bloomberg reports today that Walmart is having trouble stocking its shelves. Customers are not finding that which they seek, and are not returning. According to Bloomberg, the problem is labor -- more specifically, a shortage. "The Bentonville, Arkansas-based retailer’s workforce at its namesake and Sam’s Club warehouse chains in the U.S. fell by about 120,000 employees between 2008 and Jan. 31, according to a securities filing on March 26. The company now has about 1.3 million U.S. workers. In the same period, it has added about 455 U.S. Wal-Mart stores, bringing its total to 4,005." Here's the math: Five-year store growth at 13%; employee growth at -1.3%.

Recapping, Walmart has regulatory issues with possible violation of the Foreign Corrupt Practices Act; labor groups are active again; customers are not visiting; work is not being done...a reputational crisis in waiting, no? Other objective measures, namely the Steel City Re Reputational Value Metrics, indicate significant volatility in the measure of reputational value. In "investor relations" parlance, these data indicate that there is a deteriorating consensus about Walmart's prospects. In "reputation risk" parlance, these data are indicators of a reputation in the early stages of trouble. Momentum indicators are still neutral, but given Walmart's heft, once they start sliding aggressively, it'll be tough to reverse.

By the way, if you were wondering who were the leading and lagging firms in the retail sector, the current king is Costco (COST). At the other end of the spectrum, the firm with the lowest reputational value among its 15 peers is Sears Holdings (SHLD).

RepuStars 2013 March 31

C. HUYGENS - Sunday, March 31, 2013

Weekly Reputation Index Metrics


At the close of trading March 29, 2013, REPUVART and REPUVAR stood at 3272.09 and 2794.26 respectively. Over the past four weeks, the former has changed by 3.12%, while the latter has changed by 3.05%. The benchmark S&P500 Composite Index stood at 1366.79 (31 Dec 2001=1000) and has changed over the past four weeks by 3.36%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 14.12% and 12.28% respectively; the S&P500 Composite Index has changed by 11.41%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 59.51% and 52.64% respectively; the S&P 500 Composite Index has changed by 33.75%.

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

Analysis

With major holidays in the Jewish and Christian communities, trading on the Western exchanges, concerns about economic uncertainty, and other real world matters took a back seat to ocean cruises and dinners with family. Even North Korea’s bellicosity left most yawning

In this setting, it is still not clear what constitutes rational expectations as RepuSpx reverts to near-parity and RepuStars contains its losses. The greatest gains in the portfolio for the year are being reported by Lamar Advertising Co (LAMR) holds on to first place with a return of 21.48%, up from last week. Bed Bath and Beyond (BBY) holds on to second place with 13.22% for the year, and American Gas Partners strengthens its hold on 3rd place with a return of 13.17%. 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, the greatest disappointments this year are scandal-plagued VeriFone Systems Inc. (PAY) at -32.92%, down a bit; France-based Compagnie Generale de Gephysqu Vrts SA at -26.04%; and Apple Inc.-linked Fusion-IO, Inc. (FIO) at -25.83%.

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 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 2012.

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

Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of The McGraw-Hill Companies, Inc. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). “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 Dow Jones Indices LLC, Dow Jones, S&P and their respective affiliates (“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 S&P Dow Jones Indices 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.

Google: Trying not to be evil

C. HUYGENS - Thursday, March 28, 2013
Ezra Klein, the editor of Wonkblog, a columnist at the Washington Post, and a contributor to both MSNBC and Bloomberg, has a problem with Google. He's not sure he can trust it.

Mr. Klein's an early technology adopter and at the vanguard of the horde that seizes opportunities afforded by new applications and then creates the buzz. Google needs people like Ezra to draw attention to their applications and drive consumption. The problem is that Google has built up a track record of creating free web services, drawing traffic, and then killing the products. It's their right, of course, but 'free' is a misnomer. Users invest considerable time and effort, and then rely on the service. When the benefits of the service are taken away, users feel cheated. In reputational parlance, there's an expectation mismatch that is now generating a new set of expectations: that Google will take away that which it first giveth. That's a reputational problem.

As Mr. Klein wrote recently in the Washington Post, "...the Gmail experience, the death of Google Reader, and the closure of Picnik all have me questioning whether I want to keep investing time and energy in “free” Google products or whether I need to start looking for paid services that are explicitly making money off the thing I am paying them to do."

The reputational metrics from Steel City Re show increasing RVM volatility -- the sort of pattern you'd expect from activity generated by a stakeholder community that is beginning to question its relationship with a company. RVM, as followers of this blog and as readers of Reputation, Stock Price and You know, is a non-financial measure of reputational value reported in Gerken units. It's current volatility, a 90-day exponentially weighted moving average of RVM volatility, recently spiked at 7% -- the threshhold value above which the relative risk of a market value loss of greater than 7.5% in the near future exceeds 1.0, according to the reputational consultants at Consensiv. Is it time to short Google? 

RepuStars 2013 March 24

C. HUYGENS - Monday, March 25, 2013

Weekly Reputation Index Metrics


At the close of trading March 22, 2013, REPUVART and REPUVAR stood at 3226.37 and 2756.27 respectively. Over the past four weeks, the former has changed by 1.77%, while the latter has changed by 1.63%. The benchmark S&P500 Composite Index stood at 1356.08 (31 Dec 2001=1000) and has changed over the past four weeks by 2.72%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 11.86% and 10.09% respectively; the S&P500 Composite Index has changed by 11.44%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 57.67% and 50.93% respectively; the S&P 500 Composite Index has changed by 32.59%.

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

Analysis

The US markets are booming notwithstanding sequestration, the ongoing threats of Federal Government shutdown, and budget impasses. Europe and the BRICs are floundering, and Cyprus is showing that at least part of the independent part of the island shares at least some traits with Greece. It is Alice in Wonderland on Wall Street.

In this setting, it is not clear what constitutes rational expectations – the foundation for RepuStars. Add fraud, regulatory risk, and other surprises, and it makes for a highly volatile portfolio. The greatest gains in the portfolio for the year are being reported by Lamar Advertising Co (LAMR) returns to first place with a return of 19.78%, down a bit from last week, but plenty to surpass last week’s leader, Companhia Energetica Minas Gerais (ADR) (CIG) that lost more than 12% on rumors of regulatory risk. Bed Bath and Beyond (BBBY) returns to second place with 13.51% for the year, and American Gas Partners (APU) is again in the top rankings with a return of 11.16%. 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, the greatest disappointments this year are scandal-plagued VeriFone Systems Inc. (PAY) at -31.11%; Walter Investment Management Company (WAC) at -26.24%; Apple Inc.-linked Fusion-IO, Inc. (FIO) at -25.65%.

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 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 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

Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of The McGraw-Hill Companies, Inc. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). “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 Dow Jones Indices LLC, Dow Jones, S&P and their respective affiliates (“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 S&P Dow Jones Indices 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.

Companhia Energetica Minas Gerais: Ominous signs

C. HUYGENS - Friday, March 22, 2013
Businesses operating in heavily regulated sectors invest significant resources in compliance matters and benefit from these exercises in control by having significantly fewer adverse reputational events. Steel City Re's actuarial data indicate that all things being equal, a company in the health care or utility sector is half as likely to experience a reputational value crisis.

Further analysis of Steel City Re's data by Consensiv show that the risk of a material loss of 7.5% or more in market capitalization is similarly reduced in these two sectors. Consensiv's analysis also indicates that there are warning signs of a pending adverse market cap event. All things being equal, an increase in the current RVM volatility in excess of 7% is associated with an increased risk of a near-term market cap fall. Background on the measures of reputational value can be found in the book, Reputation Stock Price and You: Why the market rewards some companies and punishes others.

Because they are in many ways protected from market forces, healthcare companies and utilities tend to attract investors with low risk tolerances who are rewarded with predictable performances. The lives of these companies are not unlike those of anesthesiologists: 99% boredom and 1% pure terror. When bad news comes, rare as it is, reactions are profound. A rapid rise in the current RVM volatility, or as it is called by Consensiv, the Consensus Trend, should therefore be doubly regarded as a credible warning sign.

Companhia Energetica Minas Gerais, or CEMIG, (NYSE:CIG) is a Brazil-based holding company primarily engaged in the electricity sector. The Company is mainly active in the construction and operation of systems of production, transformation, transmission, distribution and commercialization of electric power. It is also a constituent member of the RepuStars Variety Composite Equity Index, calculated by S&P/Dow Jones Indexes whose value is reported weekly on this blog.

Four weeks ago, as shown in the chart below, CEMIG's  Current RVM Volatility (top row, right, red EWMA CIG curve) began rising sharply. The data in the chart are current as of last Thursday, 8 days ago. Wednesday, 2 days ago, equity values plunged after "Banco Bradesco SA and Banco BTG Pactual SA disclosed their expectation (note the presence of that key word, expectation) that Brazil’s regulator might curb electricity rate increases." Other consequences included sending the Bovespa index to a two- week low.


Recent Comments


SuMoTuWeThFrSa
   1234
567891011
12131415161718
19202122232425
262728293031 
 

Subjects

Archive