MISSION INTANGIBLE

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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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Eight Horsemen of the Banking Risk Apocalypse

C. HUYGENS - Monday, February 03, 2014
Banks must develop a written framework to manage risks or face civil money penalties for failure to comply with new regulations from the Office of Comptroller of the Currency (OCC). Issued on January 16, the proposed rules and guidelines requires management controls for the following eight (8) enumerated risks: credit, interest rate, liquidity, price, operational, compliance, strategic and reputation.

The Proposed Guidelines would generally apply to insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $50 billion or more (each a Bank, and collectively Banks). Banks would also be required to develop a written three-year strategic plan that is developed by the CEO with input from the applicable business units (front line, risk management, and internal audit).

The Bank's board of directors (Board) would be required to evaluate, approve, and actively monitor implementation of the strategic plan. Read more.

RepuStars 2014 January 31

C. HUYGENS - Sunday, February 02, 2014

Weekly Reputation Index Metrics


At the close of trading January 31, 2014, REPUVART and REPUVAR stood at 3348.01 and 2803.17 respectively. Over the past four weeks, the former has changed by -7.23%, while the latter has changed by -7.23%. The benchmark S&P500 Composite Index stood at 1552.67 (31 Dec 2001=1000) and has changed over the past four weeks by -2.66%. The current calendar year spread between REPUVAR and the S&P500 is -4.56%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 1.42% and -0.84% respectively; the S&P500 Composite Index has changed by 18.99%. The trailing 12-month spread between REPUVAR and the S&P500 is -19.83%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 28.14% and 21.73% respectively; the S&P 500 Composite Index has changed by 36.33%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are -5.33%, 23.09%, and 79.76% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 4.10%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are 1.89% and 23.94%.

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

Analysis

If the diminishing expectations for global stability were dragged down by the shenanigans in the peripheral Euro-zone a few years back, just imagine what concerns over the emerging markets might do. The Financial Times reports that “in the week to last Wednesday, outflows from emerging market stocks jumped to $6.3bn, the larges weekly withdrawal in nearly three years.” br />
There are two powerful drivers of the global retreat from 2013’s euphoria. The first is China’s move from investment to consumption. The other is reduced global liquidity spurred on by the US Federal Reserve’s pullback from its massive bond purchase program. Interest rate rises are on the horizon making the risk of global equities, er, too risky.

The greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Cavium (CAVM), new to the winner’s circle, in first place with returns of 5.57%. Health Care REIT, Inc. (HCN), also new to the circle, is in second place with returns of 3.32% . Third, and also new to the winner’s circle, is AutoNation (AN) with returns of 2.41%. These are three of the 41 firms identified by the RepuStars Variety algorithm at the start of 2014 as value opportunities.

As for those whose reputational value may have been overestimated, Rent-A-Center is in the stocks with returns of -21.7% Mobile TeleSystems OJSC (MBT) is down a hefty -13.27%, and CNH Industrial NV (CNHI) is down -10.45%.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 31 names are NextEra Energy (NEE) at 5.00% to date, Ameren Corp (AEE) at 4.62%, and Pepco Holdings, Inc. (POM) at 3.9%.

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). These are the same metrics that power the reputation controls provided by Consensiv, and the league table of reputational value, the Consensiv 50,  published periodically, and most recently January 1, 2014, by CFO.com.

The RepuStars Variety Corporate Reputation 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 18 Jan 2014.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index.

The strategy used to pick the constituent members of REPUSPX, REPUVAR and REPUVART is discussed in the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012). (Link below)

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.

Risk Management: You're doing it wrong

C. HUYGENS - Friday, January 31, 2014
CEB, a member-based advisory company, published an Audit Committee hot spot list for 2014 -- the top risks Boards need to consider. Although there is no shortage of league tables documenting Board opinions, one item stood out as odd. Ranked #3 on the list of risks was, wait for it…risk management.

Increased risk volatility has driven many companies to adopt formal enterprise risk management (ERM) programs to better coordinate and respond to new risks. These programs are still maturing across companies and firms continue to struggle to integrate risk discipline into corporate practices and management cultures.

In other words, risk management is a management function. It is not an insurance procurement function, although risk transfer through insurance is one of several strategies available to manage risk. The disclosure brings to mind surveys from the summer and fall of 2013 wherein board members and c-suite executives ranked reputation risk as one of their top concerns, and acknowledged that they lacked a framework with which to manage it.

Ironically, a recent article in Risk Management magazine added no clarity to the reputation risk management framework by confusing brand -- a promise that sets customer expectations -- with reputation -- the measure of expectations driven by the awareness and measurable proof points of past experience and present circumstances. Jonathan Salem Baskin, a marketing whiz who now devotes much of his energy to reputation controls at Consensiv, illustrates the differences between brand and reputation almost daily with his news briefs. Read them here.

Read about the CEB Audit Hot Spot list here.

Innovation: Sharia and Intellectual Property - 21 Feb 10h00 EST

C. HUYGENS - Thursday, January 30, 2014

Briefing Friday 21 February at 10h00 ET

Program: Innovation: Sharia and Intellectual Property



Monopoly rights in the use of assets reflect cultural values. Intellectual property rights, for example, are enshrined in the ultimate authority in the US, the country's secular Constitution. What about other countries and cultures where authority is derived from spiritual texts?

Joining the program Friday, February 21 to discuss Islamic IP law and its interpretation and practice through the lens of Sharia law will be Dr. Imad-ad-Dean Ahmad, President of the Minaret of Freedom Institute, an Islamic think-tank; and Dr. Michael Greenberg, Rand Corporation, and also a member of the Society's Reputation Leadership Council.

Jonathan Salem Baskin,  Managing Director of Consensiv, moderates. Learn more.

Don't Drink the Water and Don't Breathe the Air

C. HUYGENS - Wednesday, January 29, 2014
Although Huygens generally addresses the link between corporate reputation and economic behavior, it is helpful from time to time to descend from the clouds of economic theory and remember that these principles are based on basic rational human behaviors and apply to everyday events. In other words, behavioral economics applied to issues such as ethics, innovation, quality, safety, sustainability, and security has practical applications.

Consider the safety reputation of Mexican water. Reputation is the expectation of future performance informed by past experience and moderated by actions in the present. There are enough personal and vicarious experiences with Mexican water to substantiate its reputation as "non-potable." Mexico City’s legislators have decided to combat this reputation by requiring that 65,000 restaurants install filters and offer patrons free, safe drinking water.

But just as you can lead a horse to water but not make it drink, this strategy is doomed. Requiring that restaurants serve safe water isn’t the same thing as ensuring it, even if they risk fines if the law is violated. Further, behaviors are the outcome of a sometimes implicit balancing of potential risks and rewards, and the upside for drinking free water out of a pitcher may well continue to be outweighed by the risks of doing so.

As with all the corporate examples of reputation leading to behaviors with economic consequences, this one has a monetary value too. Martinez-Robles [an industry consultant] estimates the bottled-water market in Mexico reached $5 billion in 2012. Read more.

Reputational Benefits of the London Stock Exchange

C. HUYGENS - Monday, January 27, 2014
Reputation was the major source of enterprise value growth for listed companies on the London Stock Exchange according to a public relations trade magazine, the Holmes Report. Notwithstanding the blather about reputation contributing to market cap, which is all true, the article unfortunately concludes with a hearty "atta-boy" for the communications industry, to wit, "Communications leaders should take a lot of credit for building the value of the assets in their charge. The growing professionalism of the function and its impact on corporate decision-making paid dividends."

Points for linking reputation to value; demerits for focusing on market cap and communications.

Jonathan Salem Baskin applauds the metrics, but cautions that a diversity of financial metrics are better for gauging reputational value; i.e., pricing power, labor costs, credits costs, etc. where the impact of every stakeholder can be seen. Stock price is a less useful measure because it is closely linked to the expectations of one particular group of stakeholders: investors. And in down markets, a reputation may be very strong but spending power very weak - it is then that reputation as a relative source of value becomes most apparent. Ultimately, notes Baskin, reputation is "an expression of relative worth between companies, within sectors, and across markets." Read more.

As for the value of public relations, communications are clearly part of the equation, but they are the tail, not the dog. Reputation, whose value rests on the degree to which key business processes meet or exceed stakeholder expectations, realizes its value when stakeholder are able to appreciate transparently the benefits of the business processes. These processes generally fall into the six categories of ethics, innovation, quality, safety, sustainability and security. Communications can only communicate that which the business achieves, or reasonably aspires to achieve . If communications are ahead of business realities, then communications becomes a source of reputation risk.

It turns out, though, that there is something rather special about the London Stock Exchange and perhaps communications. Not noted in the Holmes Report is that the risk of an adverse event that triggers a material loss of reputational value is about 35% lower for companies listed on the London Stock Exchange when compared to the average listed company. Other quantitative measures courtesy of Steel City Re, the reputational value insurer, is that Xetra-listed, NASDAQ-listed, and NYSE-listed companies are at about par, companies on the peripheral eastern and western European markets are about 40% higher, and companies listed on the southern European markets are 200% (Athens) and 400% (Cyprus) higher, respectively. 

These data suggest that communications and operations are most closely in-sync with respect to operational excellence for companies on the LSE. Points to all for setting and meeting stakeholder expectations.

RepuStars 2014 January 24

C. HUYGENS - Sunday, January 26, 2014

Weekly Reputation Index Metrics


At the close of trading January 24, 2014, REPUVART and REPUVAR stood at 3384.38 and 2834.01 respectively. Over the past four weeks, the former has changed by -5.91%, while the latter has changed by -6.00%. The benchmark S&P500 Composite Index stood at 1559.38 (31 Dec 2001=1000) and has changed over the past four weeks by -2.78%. The current calendar year spread between REPUVAR and the S&P500 is -3.96%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 1.30% and -0.98% respectively; the S&P500 Composite Index has changed by 19.77%. The trailing 12-month spread between REPUVAR and the S&P500 is -20.75%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 32.10% and 25.49% respectively; the S&P 500 Composite Index has changed by 38.66%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are -4.57%, 23.17%, and 81.36% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 3.41%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are 1.72% and 24.15%.

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

Analysis

It’s looking as if the sugar high fueled by the Fed is wearing off. Emerging markets are suffering the most as their currency is devaluing, exacerbating the dollar performance of equities offered as ADRs. RepuStars Variety is sensitive to this pain, as is every other equity. In short, this is probably the start of a melt-down.

Prices have to move closer to rational expectations for earnings. At least for the start of the year, the least loser will be the winner. RepuStars Variety will reflect the broad global market through its ADR exposure; and RepuSPX will reflect the S&P500 which is a world unto itself.

The greatest gains in the RepuStars Variety (REPUVAR) portfolio for 2014 year are being reported by Newmont Mining Corp (NEM) in first place with returns of 3.88%. Silver Wheaton Corp is in second place with returns of 1.01% . Caesars Acquisition is in third with returns of 0.90%. These are three of the 41 firms identified by the RepuStars Variety algorithm at the start of 2014 as value opportunities.

As for those whose reputational value has not panned so far, Mobile TeleSystems OJSC (MBT) is down already -6.74%, Value SA (VALE) is down -6.45%, and Yanzhou Coal Mining (YZC) is down -5.78%)

Taking a quick stroll down memory lane, the worst losers last year have moved up slightly; Fusion I-O (FIO), wrapping up at an awful -59.31% moved up to -52.61%, CGG SA (CGG) is holding at -47.34%, and Royal Gold (RGLD) is up from-32.4% to -29.4%.

As for RepuSPX, the top three performers in a portfolio of 31 names are Newmont Mining (NEM) +3.88%, Northeast Utilities (NU) +0.47%, and SCANA Corp (SCG) +0.39%.

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). These are the same metrics that power the reputation controls provided by Consensiv, and the league table of reputational value, the Consensiv 50,  published periodically, and most recently January 1, 2014, by CFO.com.

The RepuStars Variety Corporate Reputation 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 18 Jan 2014.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index.

The strategy used to pick the constituent members of REPUSPX, REPUVAR and REPUVART is discussed in the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012). (Link above and below.)

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.

Target: It's back on

C. HUYGENS - Friday, January 24, 2014
What happened in last year, stays in last year. Target's data breach, as the metrics below indicate, is no longer expected to further impact stakeholder behavior.

The adverse security event did not materially permanently erode reputational value because the company has long had a solid and valuable reputation which supported it during the recent data security crisis. That value acted like a reputation line of credit, back-filling Target's reserves during an unexpected draw down. That value provided much needed resilience.

Of course, like many other safety nets, they work well once and then need to be replaced. They are rarely "rated" for two saves. Target is a company that could use reputational value insurance to help reinforce that value against the next event. As discussed back in December:

Time will tell how significant a hit the incident will be to Target's reputation and sales. Bad events don't necessarily trigger a loss of reputation, said Nir Kossovsky, chief executive of Steel City Re, a Downtown-based insurer of corporate reputational value. The impact will depend on whether customers believe the company took reasonable actions and whether they hold the hackers, rather than Target, culpable for the breach, he said.

"Bad news headlines sting, but it's only a reputation problem if people behave differently because of it," said Jonathan Salem Baskin, managing director at Consensiv, a reputation management firm in Chicago. "There's no indication that shoppers are avoiding the chain, and experts already considered Target a leader in data security, so it's unlikely it will be punished for an all-but unforeseeable event."


The reputational value profile of Target, according to Consensiv and based on Steel City Re's reputational value metrics, is shown below. The profile provides an indication of the value and riskiness of stakholder expectations in the company's controls for such reputation-related processes such as ethics, innovation, safety, sustainability, quality, and in this case, security.

In the month that passed, Target's Reputation Premium is back to its 12-month high, the Consensus Trend, CT, hasdropped back down to its low level of 0.7% among 15 companies in the peer group.


For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

Ryanair: Lipstick on flying pigs

C. HUYGENS - Thursday, January 23, 2014
Sure service is rotten. But passengers expect that. And free access to toilets is highly over-rated. Passengers expect that too. Moreover, they'll accept those inconveniences a the right price.

Turns out Ryanair may not have found the right balance of awful low cost service and low-fare tickets. The bottom line is flashing warning signs.

Real change involves cost. When the business model focuses on cost, and finding customers equally focused on cost, trying to coax them to higher price tolerances might be a non-starter. Hence, a cosmetic approach to the problem. Ryanair is bringing in a new marketing chief, a "brilliant new website, and a fantastic, easy to use mobile app." Read more.

If the flash meets or exceeds stakeholder expectations, Ryanair's bottom line will be flying again. Else, the marketing "guru" will go down in flames.

Moving from the qualitative to the quantitative, the reputational value profile of Ryanair, according to Consensiv and based on Steel City Re's reputational value metrics, is shown below. It is worth noting that while the Reputation Premium has been sinking for months, its taken an upturn recently as in the 63rd percentile amongst the 47 peers of the Airline sector. The Consensus Trend, CT, has been hovering near the upper end of this peer group, 5.5%, suggesting significant uncertainty by stakeholders over the accuracy of the reputation premium. Currently, the reputation health is mid-level and appears to be independent of market forces. The jury is out and is debating the verdict on the new marketing effort. Stay tuned.



For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

RepuStars Update: Portfolio refreshed

C. HUYGENS - Wednesday, January 22, 2014
At the start of trading yesterday, 21 January, the constituents of the 2014 RepuStars Variety and RepuSPX porftolios, selected algorithmically on 2 January, were refreshed. The new RepuStars Variety portfolio comprises 41 names drawn from 18 commercial sectors and the broad market. In the two weeks from 2 January when the portfolio was formulated to the close of markets 16 January, the companies selected for inclusion in the portfolio appreciated on average 1.4% on an unweighted basis. The value of the RepuStars Variety Corporate Reputation Composite Equity Index (Ticker: REPUVAR) is now subject to the behavior of these new equities.

The new RepuSPX portfolio comprises 31 names drawn from the S&P500. In the two week window, the companies as a group appreciated 0.31%. The S&P500 appreciated 0.76%.

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). These are the same metrics that power the reputation controls provided by Consensiv, and the league table of reputational value, the Consensiv 50,  published periodically, and most recently January 1, 2014, by CFO.com.

The RepuStars Variety Corporate Reputation 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 18 Jan 2014.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index.

The strategy used to pick the constituent members of REPUSPX, REPUVAR and REPUVART is discussed in 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)

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