ACSI Link to Stock Prices

You may have read the January 2006 article in the Journal of Marketing proving that not only are the University of Michigan’s American Customer Satisfaction Index (ACSI) scores a leading indicator of consumer spending and overall company financial growth, they also predict stock prices. (full disclosure, ForeSee Results is a corporate sponsor of the ACSI e-commerce and e-business reports).

Claes Fornell, who heads up the ACSI, shared the latest returns with me. As of the end of September, an ACSI-based stock portfolio has beaten the market seven years in a row (will be 8 years in a row in just a few short months when we close out 2007, assuming things stay on track). That in itself is pretty incredible.

Also, the ACSI-based fund has a 5-year return of 218% - more than 100% above market with an annualized return of 26% (as of Sept 07).

BusinessWeek, the Wall Street Journal, and the Harvard Business Review have all written about this connection between ACSI scores and stock prices. There hasn’t been any evidence yet that ACSI scores move the market. But ACSI scores come out 4x a year and measure different companies and industries each quarter—I think they measure more than 200 companies now. It seems only a matter of time before the extensive publicity the scores always get starts leading people to buy or sell based on how well the measured companies did—or didn’t do. It will be interesting to watch.

 

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