Weekly Reputation Index Metrics
At the close of trading May 3, 2013, REPUVART and REPUVAR stood at 3418.24 and 2903.56 respectively. Both of these value are all time highs. Over the past four weeks, the former has changed by 5.93%, while the latter has changed by 5.42%. The benchmark S&P500 Composite Index stood at 1406.19 (31 Dec 2001=1000) and has changed over the past four weeks by 3.94%.
Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 23.93% and 21.30% respectively; the S&P500 Composite Index has changed by 17.92%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 61.76% and 54.30% respectively; the S&P 500 Composite Index has changed by 37.56%.
Other interval changes in the magnitude of the indices are shown below.
AnalysisWhile both the broad market S&P/DJI-calculated RepuStars Variety Index (Ticker:REPUVAR) and the pocket RepuSPX are surging ahead, the overall market is, frankly, frothy. The Financial Times pointed out Friday, that job growth has been consistently positive but sluggish, the effects of sequestration are yet to be recognized in national accounts, and while participation in the labor force is overall positive, manufacturing – the employment option for the less skilled – is down.
“The jobs figures were better than expected, but if you like gloom, they still contain a case to be gloomy. The worst number in the report was a 0.4 per cent drop in private hours worked leading to a 0.2 per cent drop in private payrolls (hours worked x hourly incomes). Less payroll income = less money to spend = less demand = less job creation in the future. Another sign of fragility was the diffusion index, which measures how broadly job gains were spread across different industries, where 50 means that as many industries created jobs as cut them. That index fell from 61.7 in February, to 56.2 in March and now 53.9 in April – indicating that the spread of jobs growth is narrowing.”
In this setting, it is increasingly apparent that rational expectations, which are central to assessments of reputational value, are among a group of competing drivers of stock price. RepuSpx, a portfolio that seeks algorithmically to find the best reputation-linked opportunities among the S&P500 constituent members, continues to benefit from this effect. It moved ahead of the market index for the calendar year by more than 6.3% this week. Its trailing twelve-month returns of 23.08% are beating the market by 7.06%. RepuStars, plagued by scandal-ridden companies that have disappointed stakeholders, is still containing its losses. The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), now in its third week at the top ranking with a year-to-date return of 49.8%. Wellpoint Inc (WLP holds onto second place with returns of 24.51% and Lamar Advertising Co (LAMR) remains in third place with a return of 21.38%. These are three of the 19 firms identified by the RepuStars Variety algorithm at the start of the year as value opportunities.
As for those whose reputational value has not panned out so far, there’s been a shakeup. the greatest disappointments this year are Royal Gold Inc. (RGLD) at -31.51%, scandal-plagued VeriFone Systems Inc. (PAY) at -28.48%, and with the Euro-economy now being stimulated by the central bankers, the third worst performing company is now Walter Investment at -22.04%.
Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.
BackgroundThe RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR). The RepuStars Variety Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR. Click here for real time quotes.
The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).
The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted 20 Jan 2013.
Reputation, Risk and FinanceReputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:
1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012) or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers.
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow.