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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Innovation: Reputation Mountains or Patent Mole Hills? - 17 Jan 10h00 EST MIMB

C. HUYGENS - Tuesday, January 14, 2014

Briefing Friday 17 January at 10h00 ET

Program: Innovation: Reputation Mountains or Patent Mole Hills?

While eggnog is still coursing through veins, it's appropriate to join the longstanding battle between rationalists and empiricists triggered by René Descartes' famous, "I drink therefore I am (With apologies to Monty Python)."

What is true innovation? Is it a reputation -- a perception held by stakeholders -- or is it a schedule of original, useful, and non-obvious inventions whose economic value is protected, somewhat, by letters of patent issued by a sovereign? For example, Samsung has a reputation for copying Apple, yet analysis of the patent data for each company tells a different story. What is the metric used by a majority of stakeholders? Is it the right metric?

Joining the program to explore this critical topic for the first program of 2013 are Mike Pellegrino, President of Pellegrino & Associates, LLC, a boutique valuation company; and Kenan Jarboe, President of Athena Alliance, organization dedicated to public education and research on the emerging global information economy, and also a member of the Society's Reputation Leadership Council. Jonathan Salem Baskin,  Managing Director of Consensiv, moderates. Learn more.

Reputation Risk Disclosure Could Boost Returns

C. HUYGENS - Monday, January 13, 2014
“The threat of a scarred corporate reputation currently ranks as the No. 1 type of strategic risk, according to a survey of board members, C-suite executives and risk managers conducted last year by Deloitte. So it’s surprising that some experts say most companies give investors fairly worthless information about reputational risks in the risk-factor sections of annual reports," writes Tony Chapelle today in Agenda, a Financial Times service.

“You have to put it into operational terms for it to mean something for the investors,” says Bill Gruver, a professor of investments and strategy at Bucknell University and former audit committee member at TheStreet. Carol Fox, the director of strategic and enterprise risk practice for the Risk and Insurance Management Society (RIMS), says that reputational risk is more about how managers cause the organization to behave to meet investors’ expectations rather than trying to cultivate an external image. “Disclosure of reputation risk in the 10-K … provides little value,” writes Jonathan Salem Baskin of the risk management consulting company Consensiv.

Yet a study by Baskin’s firm and Steel City Re, which insures companies’ reputations, is finding clues for making this disclosure more useful for investors."

Link to the Consensiv reputation risk disclosure study

Link to the full Agenda article (paywall)

RepuStars 2014 January 10

C. HUYGENS - Sunday, January 12, 2014

Weekly Reputation Index Metrics


At the close of trading January 10, 2014, REPUVART and REPUVAR stood at 3560.38 and 2981.39 respectively. Over the past four weeks, the former has changed by 1.22%, while the latter has changed by 1.12%. The benchmark S&P500 Composite Index stood at 1604.74 (31 Dec 2001=1000) and has changed over the past four weeks by 3.78%. The current calendar year spread between REPUVAR and the S&P500 is -1.93%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 10.58% and 8.09% respectively; the S&P500 Composite Index has changed by 25.15%. The trailing 12-month spread between REPUVAR and the S&P500 is -17.06%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 38.98% and 31.98% respectively; the S&P 500 Composite Index has changed by 44.56%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 4.19%, 33.31%, and 89.53% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 8.16%.

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 -0.56% and 25.21%.

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

Analysis

The year began with more professionals questioning 2013’s incredible market performance. First, a quick summary of assets performed as summed up by Bloomberg News, January 1, 2014:

While the Standard & Poor’s 500 Index (SPX) surged to a record in the broadest-ever advance and bonds worldwide lost money for the first time since 1999, it was the 28 percent plunge in gold, the worst in more than three decades, that stunned investors the most…[The market surge fueled a demand for equities which boosted prices further (bubble, anyone?)]…[Investors] deposited $140 billion into U.S. equity exchange-traded funds last year, more than double the total from 2012, according to data compiled by Bloomberg. Inflows to bond ETFs plummeted 78 percent to $10 billion, the data show.

Bond funds simply hemorrhaged money. On January 3, Bloomberg reported that bond redemptions peaked in 2013.

U.S. bond mutual funds had record investor withdrawals of $80 billion in 2013 through Dec. 23…Bill Gross’s Pimco Total Return Fund (PTTRX), which lost its title as the world’s largest mutual fund in October, had redemptions of $41.1 billion last year [15% of assets under management], its most ever.

At the Financial Times, skeptics were looking at the booming junk bond market and seeing foam.:

To the sceptics, the market is experiencing the kind of frothiness seen before the 2008 financial crisis. This, too, will end in tears, they warn….“A prolonged period of low interest rates, of the sort we are experiencing today, can create incentives for agents to take on greater duration or credit risks, or to employ additional financial leverage, in an effort to ‘reach for yield’”.

As for the equity markets, also from the Financial Times:

This is definitely a melt-up. Prices have moved so far away from earnings it’s started to look ridiculous…I think it’s hard to make any kind of valuation argument for the US market at all. You can look at any valuation measure from ordinary p/e to Cape to Q – they’re all expensive. The only reason to hold US equities is ongoing QE. Look back at markets since the crisis; they’ve only gone up during periods of QE. No QE, no rising market.

If the equity assets in REPUSPX, a portfolio comprising only S&P500 constituent members selected by a quantitative algorithm informed by Steel City Re's reputation metrics are in a bubble (spread over the S&P500 at 8.16% with a trailing twelve month return of 33.31%), how is the plebian "all-in" portfolio faring? Less well at 8.09%, as shown in the table below.

The greatest gains in the portfolio for 2013 (that will be reconstituted 20 January) are being reported by GameStop Corp (GME), which is still in first place at 83.55% down significantly from its high late last year. Hain Celestial Group (HAIN) is still in second with returns of 59.45%. Wellpoint Inc. (WLP) is in third place with returns of 55.15%. These are three of the 19 firms identified by the RepuStars Variety algorithm at the start of 2013 as value opportunities.

As for those whose reputational value has not panned in 2013, Fusion I-O (FIO) is at an awful -61.21, CGG SA (CGG) is holding at -44.51%, and Royal Gold (RGLD) is up at -35.78%.

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 20 Jan 2013.

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.

RepuStars 2014 January 3

C. HUYGENS - Saturday, January 04, 2014

Weekly Reputation Index Metrics


At the close of trading January 3, 2014, REPUVART and REPUVAR stood at 3608.83 and 3021.51 respectively. Over the past four weeks, the former has changed by 1.80%, while the latter has changed by 1.58%. The benchmark S&P500 Composite Index stood at 1595.16 (31 Dec 2001=1000) and has changed over the past four weeks by 1.46%. The current calendar year spread between REPUVAR and the S&P500 is 0.00%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 13.19% and 10.63% respectively; the S&P500 Composite Index has changed by 25.49%. The trailing 12-month spread between REPUVAR and the S&P500 is -14.86%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 40.91% and 33.71% respectively; the S&P 500 Composite Index has changed by 44.18%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 4.45%, 36.81%, and 95.14% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 11.32%.

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 0.00% and 26.19%.

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

Analysis

Huygens is preparing to receive the new RepuStars portfolio selections for 2014 that will take effect beginning with trading the morning of Monday 20 January. Huygens is also making adjustments to the weekly reports to better automate and standardize the REPUSPX reporting. That has put Huygens behind the eight ball and this note is being posted one week late, backdated, without any comments on constituent performances.

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 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 20 Jan 2013.

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.

Google: Reputation is a Drag

C. HUYGENS - Thursday, January 02, 2014
Earlier today, two articles appeared at Ad Age and CFO commenting on the widening impact of stakeholder attention to data privacy. The general message is that stakeholders are becoming resistant to releasing data for free. The specific message is that companies once trusted to "do the right thing" with those data, or at least not do evil, are experiencing reputation "issues" that are creating a drag on value.

From Ad Age: ...there's a growing body of thought and tools to protect, or at least impede, the collection of personal data. You can run plug-ins on your browser to throw random data at collectors; extensions that reveal who's tracking the sites you visit (and block them); and mobile apps to jam location identifiers. Expect more innovation on this front next year, along with more vocal advocacy in support of it. There's even big money somewhat inadvertently behind the issue: Microsoft has elected to make privacy a differentiator in its marketing against Google, at least for now.

From CFO.com: In its third quarter 2013 financial results, Google reported its eighth consecutive decline in price per click, the money it can charge advertisers. But what’s worrisome is that this eight percent year-over-year loss in pricing power for its core business, a symptom of reputational value loss, is associated with other signs of stakeholder disaffection.

Huygens commented on Google in March, months ago, suggesting a looming drag on value when the stock was soaring; do the reputation metrics bear out these predictions at this time?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 136 firms in its sector, Internet Software and Services, Google has held on to the highest value of the metric, Reputation Premium. But as of late, there has been a bit of volatility. This appears a subtle dip of the Reputation Premium. More obvious is the corresponding indicator that Its stakeholders are slightly less confident that this premium evidenced by an onging rise in the Consensus Trend metric to 1.3%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, even at 9.1% indicates a less volatile course than most of its peers. This is what early cracks in the reputation veneer look like, and it helps explain why Google completely dropped off the December Consensiv 50 reputation value league table.



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 2013 December 28

C. HUYGENS - Saturday, December 28, 2013

Weekly Reputation Index Metrics


At the close of trading December 27, 2013, REPUVART and REPUVAR stood at 3596.84 and 3014.96 respectively. Over the past four weeks, the former has changed by -0.12%, while the latter has changed by -0.42%. The benchmark S&P500 Composite Index stood at 1603.90 (31 Dec 2001=1000) and has changed over the past four weeks by 1.97%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 17.71% and 15.18% respectively; the S&P500 Composite Index has changed by 31.30%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 94.65% and 40.77% respectively; the S&P 500 Composite Index has changed by 33.57%.

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

Analysis

It was a quiet week of holiday good cheer and unbridled market optimism. The bubble is stable. Risks assets that are constituent members of the S&P500 Index, selected using the RepuStars algorithm to create the REPUSPX portfolio, are returning nearly 32% more this calendar year than risk assets selected using the same algorithm but that are not constituents of the S&P500 (REPUVAR) see below.

In this perverse environment, REPUSPX’s returns for the trailing twelve months are 41.92% for a spread of 12.07% over the corresponding return from the S&P500. For the calendar year to date, the returns of REPUSPX are at 41.92% for a spread of 16.01% over the corresponding S&P500 return. Contrast those impossibly high returns for the algorithmically driven portfolio limited to equities of the S&P500 with the broader market. RepuStars Variety (REPUVAR) has returned 10.11% year to date for a spread of -15.81% to the corresponding S&P500 return, and returns of 14.16% for the trailing twelve months for a -15.69% spread over the S&P500.

The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), which ends the year in first place at 97.74%. Hain Celestial Group (HAIN) moves up to second for the year with year-to-date returns of 58.58%. Wellpoint Inc. (WLP) returns to third place with year to date returns of 55.46%. 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 for the year, Fusion I-O (FIO) is at an awful -59.67, CGG SA (CGG) is holding at -45.139%, and Royal Gold (RGLD) is up slightly at -41.09%.

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 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 20 Jan 2013.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012)  or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow.

Notices

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

Reputation: Walk the walk

C. HUYGENS - Friday, December 27, 2013
Consultants seeking to feast on reputation management pie naturally want to earn a seat at the table. Reputation management still being a field of great uncertainty and a diversity of frameworks, the price of admission often looks like a dish for a pot-luck. Alas, such a smorgasbord can be risky for those who are naive, ravenous, or gluttonous. Here's a helpful hint. Real reputation management is walking the walk, not talking the talk. Read more.

And if you have not yet prepared something to bring to the table, try this: pick up a copy of Reputation Stock Price and You: Why the markets reward some companies and punish others (Apress, 2012).

Target: In the cross hairs

C. HUYGENS - Monday, December 23, 2013
Last Thursday, Target (TGT), the nation's second-largest discounter, acknowledged that data connected to about 40 million credit and debit card accounts was stolen as part of a breach that began over the Thanksgiving weekend (Read more). In a discussion on the security breach, reputation experts Nir Kossovsky and Jonathan Salem Baskin shared these thoughts with the Pittsburgh Post Gazette (Read more):

"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.

Do the metrics bear them out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 15 firms in its sector, Discount Stores, Target has generally hovered around the third quartile of the metric, Reputation Premium. Its most recent value, however, was the 57th percentile. Target's bullseye is a black eye of sorts - not necessarily permanently or even long-term, but the hit registered. Its stakeholders are slightly less confident that this premium is appropriate as evidence by a slight, almost imperceptible, rise in theConsensus Trend metric 1.3%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 4.0% a far more stable course than its peers.

The data suggest that while shaken, stakeholders are probably going to forgive Target and move on. The company, in their minds, is good; it's the hackers that are miscreants.



For more background on the Consensiv reputation controls, click here. To view the November 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here.

Boeing: Second-hand reputational value loss

C. HUYGENS - Sunday, December 22, 2013
Just as a rising tide floats all boats, a nation's reputation is closely woven into iconic firms that stand for national power. In the US, that puts McDonald's on similar footing as Boeing and Lockheed Martin. When a nation fails to meet the expectations of its stakeholders, the gap comprises reputational value risk. The risk of what, you might ask?

In a blog note at Consensiv, the reputation controls firm,  Managing Director Jonathan Salem Baskin explains that reputational value loss is when customers turn on you; e.g., Brazil's decision following exposure of NSA's overreach not to purchase Boeing-made military aircraft. Read more.

RepuStars 2013 December 21

C. HUYGENS - Saturday, December 21, 2013

Weekly Reputation Index Metrics


At the close of trading December 20, 2013, REPUVART and REPUVAR stood at 3551.28 and 2976.77 respectively. Over the past four weeks, the former has changed by -2.07%, while the latter has changed by -2.40%. The benchmark S&P500 Composite Index stood at 1583.79 (31 Dec 2001=1000) and has changed over the past four weeks by 0.75%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 14.42% and 11.93% respectively; the S&P500 Composite Index has changed by 27.14%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 92.61% and 39.24% respectively; the S&P 500 Composite Index has changed by 32.13%.

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

Analysis

Markets cheered the Fed's decision to gradually wind down its $85 billion monthly bond-buying program and vow to keep rates low for years. The VIX held as the Fed assured that this year’s rush to index equities will be more than a flash in the pan.

The bubble is stable. Risks assets that are constituent members of the S&P500 Index, selected using the RepuStars algorithm to create the REPUSPX portfolio, are returning nearly 30% more this calendar year than risk assets selected using the same algorithm but that are not constituents of the S&P500 (REPUVAR) see below.

In this perverse environment, REPUSPX’s returns for the trailing twelve months are 35.29% for a spread of 9.34% over the corresponding return from the S&P500. For the calendar year to date, the returns of REPUSPX are at 38.3% for a spread of 13.96% over the corresponding S&P500 return. Contrast those impossibly high returns for the algorithmically driven portfolio limited to equities of the S&P500 with the broader market. RepuStars Variety (REPUVAR) has returned 8.71% year to date for a spread of -15.62% to the corresponding S&P500 return, and returns of 10.69% for the trailing twelve months for a -15.25% spread over the S&P500.

The greatest gains in the portfolio for the year are being reported by GameStop Corp (GME), which holds on to first place at 98.59%. Michael Kors Holdings remains at second with year to date returns of 60.60%. Hain Celestial Group (HAIN) returns to third with year-to-date returns of 54.55%. These are three of the 19 firms identified by the RepuStars Variety algorithm at the start of the year as value opportunities.

As for those whose reputational value has not panned out so far Fusion I-O (FIO) is at an awful -60.53% for the year, CGG SA (CGG) is down much further at -45.79%, and Royal Gold (RGLD) is also down further at -44.45.

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 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 20 Jan 2013.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012)  or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow.

Notices

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

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