Weekly Reputation Index Metrics
The RepuStars® Variety Corporate Reputation Index calculated by Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re corporate reputation ranking metrics. The metrics comprise non-financial indicators of reputational value. The RepuStars Variety Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR. Click here for real time quotes.
AnalysisAt some point, the emotional shock of a crisis gives way to rational thought. The media’s obsession with Facebook has yielded to the cognitive reality that there is less than once met the eye; and the ongoing Greek-inspired meltdown of the Euro is, well, ongoing. In a competition for stakeholders’ minds, fear is yielding to rational expectations. The “fear index,” the CBOE VIX, dropped 10% from a week ago. In this more rational setting, the central thesis to RepuStars, which tries to anticipate both opportunities and pitfalls through an analysis of reputation metrics – rational expectations as reflected in economic behavior – is again manifesting in market behavior.
Repustars Variety is outperforming the S&P500 by more than 3.5 percentage points in this highly volatile year. Turning to companies who appear to have been undervalued at the start of this calendar year, the greatest gains in the 2012 RepuStars portfolio are being reported by Vertex Pharmaceuticals (VRTX) with a year-to-date climb of 78.6%. American Eagle Outfitters (AEO) is in second place at 44.75% for the year. In third place, BMC Software Inc. (BMC) with a year-to-date return of 28.46%. These are three of the 38 firms identified by the RepuStars Variety algorithm at the start of the year as value opportunities.
Side Note: A description of the 2012 portfolio constituents can be obtained here: click here.
Weekly UpdateAt the close of trading May 25, 2012, REPUVART and REPUVAR stood at 2684.13 and 2320.96 respectively. Over the past four weeks, the former has changed by -6.19%, while the latter has changed by -6.54%. The benchmark S&P500 Composite Index stood at 1147.85 (31 Dec 2001=1000) and has changed over the past four weeks by -6.10%.
Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by -3.37% and -4.69% respectively; the S&P500 Composite Index has changed by -1.00%. Since January 2009, the REPUVART and REPUVAR have changed by 114.50% and 102.09% respectively; the S&P 500 Composite Index has changed by 41.43%. Other interval changes in the magnitude of the indices are shown below.
BackgroundThe RepuStars Variety Corporate Reputation Index is the first index based on a quantitative model for analysts, investors, and company managers to help demonstrate the impact of reputation on corporate equity prices. The companies selected for the RepuStars Variety Index are chosen algorithmically to capture the disparity between value at which a company is currently trading and its value as calculated by Steel City Re’s reputational metrics.
The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to their metrics as measured by Steel City Re’s proprietary Corporate Reputation Rank™, which tracks 7000 companies weekly. In using the RepuStars Index as an investment strategy, investors can take advantage of this price disparity. The principles behind Steel City Re's reputation metrics are discussed in the book, Mission:Intangible (see below).
The RepuStars indices are reconstituted annually in the first week of January and posted by Dow Jones Indexes in the third week. The Indices were last reconstituted 20 Jan 2012. Click here for additional information on the index.
Reputation, Risk and FinanceReputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:
1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, 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.