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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 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.

GSK: Ethical pharmaceuticals discover ethics

C. HUYGENS - Thursday, December 19, 2013
In a comment on Glaxo Smith Kline (GSK) on the Society's Linked-In page, reputation consultant Andrea Bonime-Blanc wrote, "Sometimes it takes scandal to make progress: after serious fines and scandals, GSK's CEO has just announced potentially groundbreaking steps connecting the most important dots of good corporate citizenship: desired employee behaviors to performance incentives such that overly aggressive sales targets and bonuses no longer lead to unethical or illegal behavior. Time will tell but this is extremely promising." Do the metrics bear her out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 30 firms in its sector, Major Pharmaceuticals, Glaxo Smith Kline has generally hovered above the third quartile of the metric, Reputation Premium. Its most recent value was the 76th percentile. Its stakeholders are confident that this premium is appropriate as evidence by an extremely low Consensus Trend metric of 1.4%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 3.4% a progressively more stable course.

The data suggest that the "don't be unethical" strategy is being believed by stakeholders; it is not clear if that leaves them assured that the company's ethics are yet worth valuing at a greater premium.



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.

RepuStars 2013 December 14

C. HUYGENS - Sunday, December 15, 2013

Weekly Reputation Index Metrics


At the close of trading December 13, 2013, REPUVART and REPUVAR stood at 3517.35 and 2948.33 respectively. Over the past four weeks, the former has changed by -4.65%, while the latter has changed by -4.97%. The benchmark S&P500 Composite Index stood at 1546.34 (31 Dec 2001=1000) and has changed over the past four weeks by -1.27%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 14.78% and 12.13% respectively; the S&P500 Composite Index has changed by 25.59%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 88.17% and 39.50% respectively; the S&P 500 Composite Index has changed by 32.37%.

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

Analysis

It was a remarkably average week in a year where nothing was average. EADS, the European aerospace giant, announced job cuts as its 3rd quarter order book trounced Boeing. The German government strengthened as parties rallied around Merkel, the US House of Representatives compromised to reach a budget without Strang und Durm, the 1000+ page Volker rule passed assuring permanent employment for securities lawyers, and the VIX held. The broad market thought all was good, and RepuStars Variety (Ticker: REPUVAR) slid less than the bubbled S&P500.

Still, there is a bubble. Risks assets that are constituent members of the S&P500 Index, selected using the RepuStars algorithm to create the REPUSPX portfolio, are returning nearly 25% 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 still perverse environment, REPUSPX’s returns for the trailing twelve months are 34.08% for a spread of 9.01% over the corresponding return from the S&P500. For the calendar year to date, the returns of REPUSPX are at 33.51% for a spread of 12.12% 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 7.67% year to date for a spread of -13.72 to the corresponding S&P500 return, and respectable returns of 12.29% for the trailing twelve months for a -12.78% 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 90.69%. Michael Kors Holdings moves back to second with year to date returns of 57.51%. Wellpoint, Inc. (WLP) slips to third with year-to-date returns of 48.00%. 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 down further at an awful -61.94% for the year, Royal Gold (RGLD) is stable at -42.86, and CGG SA (CGG) is down at -35.27%.

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.

Wells Fargo: Crediting the regulators

C. HUYGENS - Thursday, December 12, 2013
In a comment on Wells Fargo last week, reputation consultant Jonathan Salem Baskin wrote, "the Feds are forcing Wells Fargo to improve its reputation and, as a huge consumer-facing brand because of the nature of its business, it can’t help but communicate that operational rigor to its customers." Do the metrics bear him out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 49 firms in its sector, Major Banks, Wells Fargo has generally hovered above the third quartile of the metric, Reputation Premium. Its most recent value was the 88th percentile. Its stakeholders are confident that this premium is appropriate as evidence by an extremely low Consensus Trend metric of 1.6%. This is especially notable since the 3rd quartile of the Consensus Trend measured off the scale at nearly 300%. The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 8.1% a previously more volatile course. In short, Mr. Baskin is correct; it appears, the "Fed's made 'em do it."



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.

Hilton: Another one gets it wrong

C. HUYGENS - Tuesday, December 10, 2013
The SEC-required proxy statements, the 10-Ks, exist to level the playing field for all investors. After all, transparency is a driver of market trust and liquidity. Item 1A, Risks, was added by the Sarbanes Oxley legislation in furtherance of that noble goal, and as part of the reaction to large scale shams such as Enron and WorldCom.

Reputation risk is disclosed in many 10Ks. Just among the S&P500, the disclosure rate for reputation risk has risen from around 8% of the firms in 2009 to 66% of the firms in 2013. A study of the materiality of those disclosures reported earlier this year that the consumer sector seems to have it all wrong, confusing reputation risk with brand risk. Read the study.

(Ironically, many regulators are getting it wrong too...which eventually will have a materially negative impact on systemically important financial institutions (SIFI). Read more on getting it wrong.)

The problem with getting it wrong is not semantic. Rather, getting it wrong is fostering the belief that the path to a better reputation is to better manage social media, or any media for that matter. It focuses attention and resources in the wrong place. It is wrong because the media-associated noise is an epiphenomenon; what needs to be managed are the business processes underpinning reputation comprising ethics, innovation, safety, sustainability and security. Read more on the pillars of reputational value.

Constituent members of the consumer section continue to get it wrong. The most recent entrant into the league of wrong-thinking companies is the soon-to-be-public Hilton Hotels. Read more on Hilton.

RepuStars 2013 December 7

C. HUYGENS - Monday, December 09, 2013

Weekly Reputation Index Metrics


At the close of trading December 6, 2013, REPUVART and REPUVAR stood at 3544.96 and 2974.55 respectively. Over the past four weeks, the former has changed by -1.47%, while the latter has changed by -1.70%. The benchmark S&P500 Composite Index stood at 1572.27 (31 Dec 2001=1000) and has changed over the past four weeks by 1.95%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 16.63% and 14.04% respectively; the S&P500 Composite Index has changed by 27.29%. Over the trailing 36 months, the REPUVART and REPUVAR have changed by 92.72% and 41.46% respectively; the S&P 500 Composite Index has changed by 34.32%.

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

Analysis

In the five years since Lehman Brothers, there's been much talk of green shoots and other more substantive signs of world economic recovery. However, many of the underlying problems – shaky credit markets, impaired bank balance sheets, weak public finances and indebted households – remain as a potential drag on growth. The long term view is not pessimistic by any stretch, but the equity markets behavior is decidedly optimistic - much more so than the broad market view captured by RepuStars Variety (Ticker: REPUVAR).

Risks assets that are constituent members of theS&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 35.60% for a spread of 7.93% over the corresponding return from the S&P500. For the calendar year to date, the returns of REPUSPX are at 35.75% for a spread of 12.32% 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 8.63% year to date for a spread of -14.80 to the corresponding S&P500 return, and respectable returns of 14.17% for the trailing twelve months for a -13.49% 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 despite a large drop this week with returns of 83.35%. Wellpoint, Inc. (WLP) moves up to second with year-to-date returns of around 53.25%. Michael Kors Holdings holds on to third with year to date returns of around 53.00%. 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 stable at an awful -57.45% for the year, Royal Gold (RGLD) is down at around -42.1, and CGG SA (CGG) is down at around -32.0%.

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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