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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RepuStars 2014 February 21

C. HUYGENS - Saturday, February 22, 2014

Weekly Reputation Index Metrics


At the close of trading February 21, 2014, REPUVART and REPUVAR stood at 3489.22 and 2918.92 respectively. Over the past four weeks, the former has changed by 3.10%, while the latter has changed by 3.00%. The benchmark S&P500 Composite Index stood at 1599.41 (31 Dec 2001=1000) and has changed over the past four weeks by 2.57%. The current calendar year spread between REPUVAR and the S&P500 is -3.66%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 10.17% and 7.74% respectively; the S&P500 Composite Index has changed by 22.22%. The trailing 12-month spread between REPUVAR and the S&P500 is -14.48%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 34.77% and 28.09% respectively; the S&P 500 Composite Index has changed by 39.59%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 1.35%, 27.42%, and 79.86% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 5.20%.

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 0.20% and 19.69%.

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

Analysis

The equity markets remain hot and the appetite for risk is growing to the benefit of all the companies that missed out on the surge last year. In what is either a game of catch up for a diversity of firms buoyed by a frothy market, or too much money chasing deals and steering clear of obviously overvalued assets such as the S&P500, private equity was unloading through IPOs a diversity of assets acquired over the recent past. No, Huygens is not going to try to explain the $19B valuation for What’s App, but it does help explain the narrow 0.20% difference between RepuStars Variety and REPUSPX for the calendar year.

The greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Right Aid Corp (RAD) with a stunning 19.32% return year to date. Silver Wheaton (SLW) slip back to second with returns of 18.42, and Cavium (CAVM) slips back to third with returns of 14.31%. 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 -23.86, Mobile TeleSystems (MBT) is down further at -12.17 and Con-way is trailing but up slightly at -8.79% for the year.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 31 names are Ameren (AEE) at 13.02%, Walgreen Company (WAG) up from third at 10.74%, and last week’s leader, Pepco Holdings (POM), at 10.53%

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.

Google: More reputation business

C. HUYGENS - Tuesday, February 18, 2014
Google and reputation -- not as catchy as soup and sandwich or horse and carriage, but you get the drift. At  the start of the year, Google's reputation took a dive from controversial behavior. Read more here. Now the shoe is on the other hoof. Some German fellow's reputation allegedly took a dive from controversial behavior readily rehashed by Google's algorithms.

So which is it, Marshall McLuhan? Is the medium the message that shapes reputation, as the German courts have ruled, or is the behavior the message that the medium highlights? Read more on the medium, the message and reputation according to the German courts, here.

Brand, Reputation and Risk Management

C. HUYGENS - Monday, February 17, 2014
Here's one more entry in the ongoing series on the difference between brand and reputation. In this most recent posting, Jonathan Salem Baskin from Consensiv explains to a Risk Managers' group on Linked-In why understanding the difference is important...to risk managers. Read more here.

Reputation Risk Disclosure is Not Exculpation

C. HUYGENS - Sunday, February 16, 2014
Disclosing reputation risk and doing nothing more may be a risk unto itself and a company's executives, suggests a recent district court decision. As reported by the law firm Morgan Lewis, in In re Longwei Petroleum Investment Holding Ltd. Securities Litigation, the U.S. District Court for the Southern District of New York denied a motion by the CFO to dismiss a case under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act) noting, among other things, that the signing of Form 10-K alone is sufficient evidence of control (even if control is ineffective or blatantly faudulent). Because of other facts in the case the court also found that the plaintiffs' allegations that the two audit committee members failed to take any action in response to "acknowledged reporting failures" established scienter.

There you have it. Disclose the risk and you help establish scienter without any of the immunities associated with evidencing real working controls. This is a bad hand when playing a high stakes game with an aggressive plaintiff's bar. It is also one more round of bad news for the authors of Forms 10-K who, with respect to reputation risk, were as a group charged with doing it all wrong in a study by Consensiv as reported in the Financial Times service, Agenda.

Richard Leblanc, Associate Professor, Law, Governance & Ethics, York University, observed, Just disclosing the risk may help to establish scienter, but control would be what investors want to see: namely what are the internal controls (or lack thereof) over reputation risk? And are these controls effective? Is the design and implementation of these controls regularly tested and independently reported to the board (or a committee)? Investors want to see how the various risks are being mitigated, not just that there exists reputation risk, which is blindingly obvious.

Real working controls would help exculpate Directors and Officers. Real controls, if sufficiently transparent, would signal value to investors and a red flag to the plaintiff's bar. Reputational value insurances, when designed properly with quantitative measures, provide that transparency.

RepuStars 2014 February 14

C. HUYGENS - Saturday, February 15, 2014

Weekly Reputation Index Metrics


At the close of trading February 14, 2014, REPUVART and REPUVAR stood at 3447.54 and 2884.88 respectively. Over the past four weeks, the former has changed by -1.05%, while the latter has changed by -1.12%. The benchmark S&P500 Composite Index stood at 1601.48 (31 Dec 2001=1000) and has changed over the past four weeks by -0.00%. The current calendar year spread between REPUVAR and the S&P500 is -4.92%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 3.09% and 0.84% respectively; the S&P500 Composite Index has changed by 20.85%. The trailing 12-month spread between REPUVAR and the S&P500 is -20.01%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 30.80% and 24.28% respectively; the S&P 500 Composite Index has changed by 38.45%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 0.77%, 25.02%, and 81.73% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 4.16%.

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 0.91% and 24.17%.

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

Analysis

It was a quiet week. The measure of fear index, the VIX, is down as the S&P500 achieved new heights. Businesses serving other businesses reported more record profits and layoffs; businesses serving consumers such as those laid off reported reduced sales. Is this really sustainable, or is this another example of Chuck Prince of Citibank’s famous 2007 comeback, “As long as the music is playing, you've got to get up and dance?”

The greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Silver Wheaton Corp (SLW) with a stunning 16.32% return year to date. Cavium (CAVM) slips back to second with returns of 10.37%. AutoNation (AN) moves down to third with returns of 7.32%. 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 -21.44, Mobile TeleSystems (MBT) is down -9.10 and Con-way is trailing at -9.08% for the year.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 31 names are Pepco Holdings (POM) at 10.05%, Walgreen Company at 8.16%, and AutoNation (AN) at 7.32% to date.

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.

RepuStars 2014 February 7

C. HUYGENS - Saturday, February 08, 2014

Weekly Reputation Index Metrics


At the close of trading February 7, 2014, REPUVART and REPUVAR stood at 3365.82 and 2817.05 respectively. Over the past four weeks, the former has changed by -5.46%, while the latter has changed by -5.51%. The benchmark S&P500 Composite Index stood at 1565.24 (31 Dec 2001=1000) and has changed over the past four weeks by -2.46%. The current calendar year spread between REPUVAR and the S&P500 is -4.89%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 1.06% and -1.12% respectively; the S&P500 Composite Index has changed by 19.06%. The trailing 12-month spread between REPUVAR and the S&P500 is -20.18%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 26.94% and 20.57% respectively; the S&P 500 Composite Index has changed by 35.67%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are -4.63%, 20.33%, and 77.54% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 1.27%.

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 0.34% and 21.45%.

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

Analysis

Good times are back. The economy is not as robust as one might have been led to believe, and chances are central bankers will start doling out more sugar. This will make bonds instruments for leveling tables, not supporting the demands of pension funds. The index funds will fly again. And so it goes.
 
And yet, even as global equities sink, especially those representing emerging markets, there are optimists who share beliefs with the agnostic algorithmic engine behind RepuStars Variety, that emerging markets have great potential. Watch the explanation below from John Authers of the Financial Times.



The greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Cavium (CAVM) in first place with returns of 7.44%. AutoNation (AN) moves up to second with returns of 6.01%. Vale SA (VALE) takes over third with returns of 4.28%. 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 -19.97 Ceaser’s Acquisitions (CACQ) is next with losses at -10.25% and Newmont Mining down heavily for the year at -10.15%.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 31 names are AutoNation (AN) at 6.01% to date, Boston Properties (BXP) at 4.11% and Republic Services (RSG) at 4.02%.

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.

CVS Caremark: Cares more?

C. HUYGENS - Thursday, February 06, 2014
Yesterday morning, CVS Caremark (CVS), the pharmacy healthcare provider, announced that it would no longer sell cigarettes effective October. The loss in revenue was projected at $2 billion which pundits quickly dismissed as an insignificant loss relative to the reputational value gain. It was an ethical move, clearly signaled so that the market could appreciate and value it.

By removing tobacco products from our retail shelves, we will better serve our patients, clients and health care providers while positioning CVS Caremark for future growth as a health care company. Cigarettes and tobacco products have no place in a setting where health care is delivered. This is the right thing to do. Link to CVS where President and CEO Larry Merlo explains further.

While the value to the company's image is hard to measure, there's little doubt that it's big. "They'll end up getting more than $2 billion in reputational capital and kudos," Dartmouth professor Paul Argenti tells Shots. "How often is the president of the U.S. going to come out and say your company is great?" says Argenti, referring to President Obama's praise of CVS Wednesday morning. Read more from NPR.

Actually, it is not hard to measure and it may or may not be big depending on what stakeholders were expecting, or what they value. Equity investors were not overjoyed. Over the day, CVS lost 1% while its closest rivals by market cap were flat or rose. See chart from Google.

Steel City Re's reputational value metrics, which reflect the expectations of all stakeholders including investors, are run weekly and will be added to this breaking story when they become available.

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.

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