The Consumerist ACSI Fund

We made a mock portfolio buying 100 shares of companies scoring high on the American Customer Satisfaction Index (ACSI).

These companies are in the top 20% on the ACSI scale relative to their competition, and their score is higher than the national ACSI average (75.2).

We used the same methodology as an article in the Journal of Marketing whose backtested portfolio outperformed the major indexes by 93%

We’ll monitor the portfolio and see if you can really beat the stock market by buying companies with high customer satisfaction. — BEN POPKEN

PREVIOUSLY: How To Beat The Stock Market: Buy Companies With High Customer Satisfaction Scores

Comments

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  1. mikecolione says:

    Is there a free program that will track stocks for me? I’m not really in the market, but I track a few stocks and it’s getting repetitive having to update a manual spreadsheet everyday.

  2. Wasabe says:
  3. yahonza says:

    Its a nice thought, but no way.

    Also, you need to build a mock portfolio of the companies with the worst scores to compare the portfolio to.

  4. mantari says:

    @yahonza: Such an interesting idea!

  5. Katie says:

    @yahonza: Oooh, that’s a great suggestion: I’d like to see that comparison, too.

  6. yahonza says:

    Also, you should make a mock portfolio based on a purely random scheme….like reverse alphabetical order starting with J.

    Note also that the study is from January 2006. If the authors were right and there was a hidden value in customer satisfaction it has already been considered in the price of the stock in the year and a half since the article was published, and you aren’t likely to beat the market.

    Hey, I am a skeptic.

    Still, fun experiment.

  7. AcidReign says:

    …..How in the world is Southern Company in there? They have the most feeble power network in the country! It goes out every time it rains or the wind blows, and we get all sorts of nasty spikes and brownouts. I’ve had to put all computers and network equipment on UPS boxes, TVs, stereos and musical instruments on surge suppressors, and I even have one on the fridge and dishwasher. When a hurricane blows through the state (we are 250 miles from the Gulf), we can expect outtages of 3 or 4 days. We have a cherry laurel tree in our service corridor that has grown up all entwined in the power pole and transformer that feeds us, and they have refused to cut it. The thing has been leaning at a 45-degree angle since Winter Storm ’93. Southern Company sux!

  8. ironchef says:

    Thanks for taking the time to put one together.

    My reluctance on investing this portfolio directly….
    Jim Cramer hates airlines. (LUV)
    Also your index is so heavily weighted toward utilities.


    I will be eager to watch its progress. Thanks for doing that.
    Apple satisfaction is through the roof. I am surprised it never made it to your list.

  9. drierp says:

    Buying a hundred shares of each biases this overall portfolio by giving the highest price stocks the most influence.. i.e. a 5% move in Fedex will move your portfolio by $500+ while a 5% move in Southwest will only move the portfolio about $70..

    A fairer portfolio would be one where you bought 1000$ worth of each stock on day one, and went from there..

    And anyone quoting Cramer should realize he’s right

  10. timmus says:

    I think there’s some danger in taking the ACSI survey too literally. FedEx, Mariott, and Starbucks are not what I would consider “good” companies. They’re not BAD, mind you, but not good either.

    Also the metrics only run through 2003, and corporate leadership can change like the flip of a hat.

    It seems like it would be more worthwhile for Consumerist to run a “least evil company” poll and see how that set stacks up.

  11. Ben Popken says:

    @yahonza: Good idea. We’ll try that too.

    @ironchef: The skew towards utilities comes because there are more included in the ACSI results, so more will fall in the top 20%. Apple would probably be great stock, but it wasn’t in the ACSI survey, so it’s not here either.

    @drierp: Good point. We should probably adjust it that way.

  12. mantari says:

    @Ben Popken: Ben, you’re a good guy for embracing the equal weighting suggestion. A lesser man would have stuck to his guns, since it was already out there.

  13. Notsewfast says:

    I like that you guys are trying new things, but be cautious when evaluating your results. While you are heavily allocated toward energy, I immediately note that your are almost entirely allocated toward domestic large cap stocks which will likely tend to do better in the coming quarter.

    So when looking at your results, be sure to be aware of the biases in your portfolio, and not mistake random selection of stocks in a sector that will do well regardless.

    As the saying goes, a rising tide floats all ships.

  14. Dude, I think it is awesome that you guys have been taking our suggestions into consideration. I honestly think that if we actually start investing our money into the companies that we feel deserve investments that we could actually change the way things are.

    I really mean that too. It may be a small influence and a small change but I think that it will be enough to set changes in motion. What do the rest of you think?

    I know it may be a gamble but I am always willing to take a chance on freedom.

    With our powers combined. ;)

  15. @Holden Caulfield: You bring up an interesting point– if everyone skewed their stock buying towards companies that treat their customers right then maybe the companies would start taking more notice of the value of good customer relations.

  16. uberglitzen says:

    The price of a company’s stock only affects the company’s bottom line indirectly. How about this modification:

    If everyone skewed their BUYING towards companies that treat their customers right…

    Oh wait, there’s already a name for that — the free market.

  17. The Reviewer says:

    Ben,

    What did you use to make this set of fake stocks. I am really interested in this information and would like to check my own fake portfolio, and then drop 10K or so in it, if it looks good.

  18. mee2 says:

    In response to drierp above, buying $1000 worth of each stock won’t accurately determine if you beat the stock market either. Instead, you should buy shares based on the market cap of the stock. This is how stocks are weighted in the NYSE (If microsoft moves 5%, the NYSE will move by a lot, and so should your portfolio).

    So this is what you do:
    -Establish a base amount of money to invest.. say $100
    -Buy $100 worth of Darden restaurant stock
    -Invest $271 in Marriot ((17.4/6.4) * 100) – market cap is 270% higher for marriot, so you invest 270% more
    -Follow accordingly with the other stocks

  19. Havok154 says:

    @hls08:

    The downside is that with some of the companies out there, we have no real choice about only supporting companies that treat their customers good. For TV/Internet, I have 2 choices, Comcast, which sucks, or DSL/Satellite, which is just as bad quality-wise, with the added bonus of ETF’s. Until FIOS makes it down to my middle-of-no-where house, I’m stuck with poor service and extremely poor customer service.

  20. mac-phisto says:

    cool. even if it doesn’t do any better than the market, it’s still a neat idea. i mean, look at all those “environmentally friendly” stocks that started popping up not too long ago b/c of all the tree huggers. WELL SCREW THEM! now we have our own favorite stock picks too.

    today wall street. TOMORROW THE WORLD! BWAAAAHHAHAAAHAAHA!!

  21. uberglitzen says:

    @Havok154: True… all of the benefits of the free market don’t really apply when the market isn’t truly competitive. Hopefully you will get some decent competition soon!

  22. yahonza says:

    @hls08: Another thought I had….if I were going to invest money in companies to encourage them to do things I preferred, I don’t know if Customer Service would be the first thing on my list.

  23. Ben Popken says:

    @The Reviewer: I used Google Finance to create the portfolio.