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

Boeing: When customers expect delay

C. HUYGENS - Friday, September 13, 2013
The financial benefits of a superior reputation among customers, Huygens has explained, arise from one or more of these three factors: customers will grant the firm pricing power, will purchase greater volume, or will shorten the sales cycle time. Raise the price, and the volume will fall. Lower the price and the sales cycle time will shorten. A superior reputation provide a company the opportunity to optimize the three for maximum enterprise value.

For those familiar with Cajun cooking, these three factors are like the trinity of onion, celery and green peppers. The ratio in which they appear in a particular meal depends on the chef's tastes, but irrespective of ratio, they provide a constant mix of water, solids and salt. Boeing, as reported by Reuters and discussed in the Consensiv blog today, is fighting a lengthening sales cycle time with aggressive pricing. The problem is that the Japanese airlines that have had the pleasure of sharing Boeing's growing pains are concerned about delay risk. And are therefore delaying their own decision making.

"...little concerning the 787 program has been business as usual at Boeing. It is a wildly innovative plane, from its design and manufacturing, to its performance and experiential capabilities. So it was never credible that its stakeholders should have been told (or allowed) to expect it to resemble past projects. Innovation comes with risks, but there was never an overt or clear effort to value and control it, leaving a delivery schedule as the only proof that made sense to everyone: No matter how different, the ultimate outcome of building and selling a new airplane would be the same. Only it wasn’t and isn’t, as evidenced by the reputational risk now being charged to Boeing.

The Reuters reference to the company countering with “a sales offensive” likely means reduced prices and higher costs on its planes. There are probably borrowing and insurance implications commensurate with this new reality. Perhaps the suppliers it relies upon for parts for the 777X will expect more liberal terms and protections, which will also hit the company’s bottom-line."
Read more here.

The Steel City Re reputation value metrics show that over the year, Boeing's reputation premium has been deteriorating. Over the summer, all vectors have been negative. Moreover, over the past four weeks, current RVM volatility has begun rising.

The metrics have a cyclic pattern reminiscent of the water torture BP went through, albeit to a much lesser degree. Still, the bad news is progressive, and as suggested in July, Boeing has reason to fear a BP moment -- when it becomes clear that stakeholder's worst fears are coming true.

Apple: Forward guidance needed

C. HUYGENS - Thursday, September 12, 2013
"Spare the rod, spoil the child," advises the behavioral dictum. Reputation controls expert Jonathan Salem Baskin believes the same holds for Apple Inc.'s (AAPL) stakeholders.

Writing in Forbes, the moderator of the Society's Mission Intangible Monthly Briefings and Managing Director of Consensiv notes that "…analysts of all stripes are opining that the company is long overdue for a big success. They’re wrong," he asserts. "It needs to give us a failure. Something spectacularly bad could be just what it needs."

The reputational value metrics from Steel City Re shown below paint an unattractive picture. It appears that in November of 2012, Apple Inc. fell off its pedestal and shed an enormous amount of reputational value (Reputation Premium) dropping from the 100th percentile of its peer group to around the 67th percentile. However, since then it has regained ground as stakeholders talked themselves into, again, unrealistic expectations.

Not so the investors. Consistent with prior observations of RVM volatility reported by Consensiv, the company's RVM volatility spike of 8% (Consensus Trend) in November was followed by market value turbulence. (RVM is a non-financial measure of reputational value). But even investors began to feel optimistic over the summer giving the stock price a boost from what was already a dismal performance for the year.

After years of having a coherent view of Apple and expectations of infallibility, all evidenced by a dangerously low Consensus Benchmark, stakeholders who forgot that real companies blunder from time to time are having doubts. But fears are still being masked by hopes, so disappointment hurts even more. Ergo, a very recent RVM volatility spike of hope and fear that was followed by more market value loss reflecting further disappointment. Read the full story here.

BP: Not taking it anymore

C. HUYGENS - Wednesday, September 11, 2013
BP is mad as hell and not taking it anymore. They're drawing a line under the amount of compensation they're prepared to pay for the April 2010 Gulf Disaster, and taking the fight to litigators, regulators and mommy bloggers.

“BP has done what it was required to do,” said Jonathan Salem Baskin, a Chicago-based brand management specialist and co-founder of Consensiv, a consulting firm for managing reputations. But he added that “after spending millions in communications saying, ‘I’m sorry,’ from a reputation standpoint, it’s done nothing in terms of their financial performance.

Read the whole story in Politico.

Research Reveals Major Flaw in Public Company Risk Disclosure

C. HUYGENS - Tuesday, September 10, 2013
Huygens is pleased to share notice of a new study on reputation risk.

Beginning in 2005, the SEC mandated firms to include a “risk factor” section in their Form 10-K (Item 1A) to discuss “the most significant factors that make the company speculative or risky.”1 This suggests that regulators believe that investors benefit from disclosures about firm risk and uncertainties. In parallel, directors and senior executives have been disclosing in the business literature the primacy of reputation as a source of market valuation. In this study, we examine the information content of the disclosure of risk to reputation and its relationship to corporate performance. We observed four different correlations with disclosure of risk to reputation among constituents of the S&P500 composite equity index. When analyzed as a homogenous group, we found no material difference between Reputation risk Disclosers and Non-Disclosers with respect to almost every equity, dividend, asset or reputation measure. However, when the groups were stratified by sector, three correlations emerged. In the Energy sector, Disclosers outperformed. In the Information Technology sector, Non-Disclosers greatly underperformed. Last, in the Consumer sector, Disclosers underperformed. We conclude that there’s little correlation between reputation risk disclosure and materiality to performance. When there is a correlation, it often contradicts presumptions that greater risks are reflected in lesser or more volatile performance (it’s not). Therefore, reputation risk disclosure in Form 10-K Item 1A is not a reliable indicator upon which investors can base buy or sell decisions.

Read the full study here.

RepuStars 2013 September 7

C. HUYGENS - Sunday, September 08, 2013

Weekly Reputation Index Metrics


At the close of trading September 6, 2013, REPUVART and REPUVAR stood at 3556.20 and 2998.02 respectively. Over the past four weeks, the former has changed by 0.14%, while the latter has changed by -0.06%. The benchmark S&P500 Composite Index stood at 1441.69 (31 Dec 2001=1000) and has changed over the past four weeks by -2.14%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 17.79% and 15.29% respectively; the S&P500 Composite Index has changed by 15.11%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 114.40% and 69.68% respectively; the S&P 500 Composite Index has changed by 61.44%.

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

Analysis

The first week back to school featured risk on/risk off views of Syria, bonds on/bonds off views of central bankers, and some thumb sucking. All that made the spreads of REPUSPX and REPUVAR fork over a small cost.

REPUSPX inched up to a 42.47% return for the year, but decreased its healthy spread over the S&P500 to 26.89% while RepuStars (REPUVAR) increased its spread loss for the year to date to -3.69% on an increased return of 9.49% for the calendar year and 16.84% for the trailing twelve months.

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 100.04%; returning to second place with year to date returns of 47.23% is Wellpoint Inc (WLP); while returning to third place is Michael Kors Holdings (KORS) at 44.94% for the year. For believers in undergarments as leading indicators of market behavior, the return of Kors is a good sign. 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 remains at bottom for a year-to-date loss of -50.93%, Royal Gold (RGLD) slips back to -29.21, and VeriFone Systems Inc. (PAY) is up almost 10% of its original value with a loss of -26.01% for the year.

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.

CRM Redefined: Customer reputation management

C. HUYGENS - Friday, September 06, 2013
In some circles, conversations on the notion of reputation are undergoing lexicographic upgrades. For example, the psychological notion of expectation which is the framework Huygens prefer, is being framed in sociological terms as an implicit social contract between a company and its stakeholders. No matter. A contract comprises an implicit expectation of performance and a penalty for a breach. The conceptual model works well.

Fast forward to customer relationship management, and that concept is now undergoing a face-lift, too. The Consensiv blog calls out this story: Mike Muhney, the co-inventor of one of the customer relationship management, or CRM software programs that lets companies track the in and outflow of activities that “touch” customers, notes that only half of the companies using such tech tools gain any significant return on their investment. The problem, as he explained in an article in Wired earlier this month, is that users should think of “relationships” as the sources of “reputation.” Read more.

Nokia: Stained shorts

C. HUYGENS - Tuesday, September 03, 2013
Surprise, surprise! Shorting securities is a high risk gamble. Never mind that a key motivator is a deep-seated belief that a company is doomed. Dead is dead. But equity investors have a wonderful way to resurrect companies in advance of a sale. Nokia (NOK), pronounced dead by Huygens long ago, returns to help Microsoft (MSFT) address its own problems. The street says Microsoft is buying hardware, intellectual property, and a former Microsoft executive who may replace Ballmer.

Over the past five years, Nokia has lost 80% of its value falling from $21 to less than $4 on Friday. Today it is up 40% in early morning trading. Nokia shareholders are celebrating. Nokia shorts are turning to NetFlix (NFLX) shorts for advice. Microsoft investors are less enthused. The stock is down 4.75% in early morning trading.

That equity investors were surprised should not be surprising, looking at Steel City Re's reputational value metrics. Stakeholders as a group were seeing upside, but no there was no expectation of a major event. Stakeholders collectively were progressively giving Nokia some additional reputational premium that was pushing its equity returns to above average levels relative to the 72 peers of the telecommunications equipment sector. The expectations were for continued increase in the reputation premium (CRR). Also, while forecast stability, a vital sign, was only in the 14th percentile, the consensus trend (RVM Volatility) was below average suggesting a uniformity of expectations. These data all suggest that shorting Nokia at this time would have been a bad idea, but they also indicate that there was no real expectation of a major upside event.

Labor Day Musings on Reputation

C. HUYGENS - Monday, September 02, 2013
Huygens has friends, and when he elects not to work on the day set aside to not work in honor of working, he takes pride in knowing that others are celebrating the day working in honor of those who are not working in their honor. Under such circumstances, it is only fitting and proper that their labor be further honored with the following links:

From Consensiv, and IAFS MIMB moderator Jonathan Salem Baskin, Labor’s Reputational Value.

From Reputation Xchange, and authority Leslie Gaines-Ross, State-ly Reputations.

RepuStars 2013 August 31

C. HUYGENS - Saturday, August 31, 2013

Weekly Reputation Index Metrics


At the close of trading August 30, 2013, REPUVART and REPUVAR stood at 3509.57 and 2959.57 respectively. Over the past four weeks, the former has changed by -2.66%, while the latter has changed by -2.92%. The benchmark S&P500 Composite Index stood at 1422.35 (31 Dec 2001=1000) and has changed over the past four weeks by -4.49%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 20.94% and 18.39% respectively; the S&P500 Composite Index has changed by 16.10%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 120.47% and 74.80% respectively; the S&P 500 Composite Index has changed by 66.35%.

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

Analysis

In the week before the labor day weekend in the United States, which like Golden Week in Japan, is a sacred cessation of all meaningful work – in this instance, bidding farewell to the summer and devoting quality time to children. In global markets, dominant issues included a risk on/risk off war expansion of Syria’s already global problem (the proxy battle that used to be known as Arab-Israeli wars is now a proxy battle of Shia/Sunni wars); emerging markets had their say (but no one listened), the Eurozone recovery stalls on credit risk, and as banks the world over secure their position as piñata-of-choice, BP escalated its charm offensive by lambasting Louisiana’s state leadership. All that gave the spreads of REPUSPX a tiny boost, and REPUVAR a small cost.

REPUSPX slipped to a 39.64% return for the year, but increased its healthy spread over the S&P500 to 27.97% while RepuStars (REPUVAR) increased its spread loss for the year to date to -3.58% on a return of 8.08%. 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 102.46%; Hain Celestial Group (HAIN) moves up to second place with returns of 44.69%%, and slipping down to to third place with year to date returns of 43.6%,Wellpoint Inc (WLP). 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 remains at bottom for a year-to-date loss of -51.56%. VeriFone Systems Inc. (PAY) is down -35.71% for the year, and Royal Gold (RGLD) comes crashing back down with year to date losses of -26.83%.

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.

Blackberry: The end is nigh

C. HUYGENS - Friday, August 30, 2013
Earlier this month, Huygens doubled down on his belief that Blackberry was doomed. The death knell is ringing, and it sounds like this. From Bloomberg, Aug 30, 2013, "Morgan Stanley (MS) is holding off on upgrading its employees to BlackBerry Ltd. (BB)’s newest smartphones and operating system because of concerns that the Canadian company may not back its platform long-term, according to two people with knowledge of the bank’s plans."

Blackberry, nee Research in Motion, is in the last stages of a full-blown reputational crisis. Such a crisis, as Huygens frequently declares, is the realization of reputation risk which is defined as the threat to enterprise value when myriad stakeholders perceive that corporate behavior violates their expectations. Morgan Stanley would expect Blackberry to support its platform long-term; it is now expecting that the company will be unable to do so.

As to last stages, as Huygens is formerly a deputy coroner of Los Angeles county, the situation is ad oculos.

Recent Comments


SuMoTuWeThFrSa
  1
2
345
6789101112
13141516171819
20212223242526
27282930   
 

Subjects

Archive