As consumers, we have all been frustrated by companies which did not meet our expectations. Either poor service or a low quality product, the end result was always the desire to do less business with the given company.
However, on the other side of the coin, there are those companies out there that go above and beyond, time and time again. Those are the companies I like to frequent, and I have always wondered if these types of firms—which have a long history of satisfying their customers—end up making better investments too.
Well, in this edition of the Dutram Report, I talk to Kevin Quigg, chief strategist of ACSI Funds, for some insights into this topic and if this idea works as an investment.
Kevin is an expert in the American Customer Satisfaction Index, a benchmark that exists to find companies that customers either like, or would rather avoid. This is done by looking at a few key areas of the customer satisfaction process, including customer expectations, perceived value, and perceived quality.
This data has proven to be extremely popular with companies, as it helps them to keep tabs on the competition and to see their relative standing among their peers too. But the data can also be used to shape the outlook for companies and to see how they are trending in terms of customer satisfaction, which can help to show which companies are moving in the right direction.
ACSI’s idea is that customer satisfaction leads to customer loyalty, which leads to additional consumer spending which ultimately leads to long-term stock appreciation. This intuitively makes sense, and now there is a way to use this strategy in ETF form.
This is via ACSI Funds’ American Customer Satisfaction Core Alpha ETF (ACSI - Free Report) . This product holds securities that have high ACSI customer satisfaction scores, with the theory being that these will outperform their low-satisfaction peers.
Current holdings include well-respected names like Apple (AAPL - Free Report) , Johnson & Johnson (JNJ - Free Report) and Alphabet (GOOG - Free Report) just to name a few, though there are dozens of names in the portfolio. And if you are wondering what is done for sectors where customer satisfaction levels aren’t as readily available, such as energy or materials, big ETFs—such as XLE or XLB—are utilized in order to give more market-like exposure.
For a more in-depth look at this index as well as its investable counterpart, make sure to listen to the podcast for additional information. We highlight some of the strengths and potential pitfalls when it comes to this strategy, and how it might fit into a portfolio too.
So, make sure to listen to this edition of the Dutram Report for a closer look at this novel segment of the equity world for some one-of-a-kind insights into this market, and the potential for investors to exploit this simple idea for their portfolios. And for more news and discussion regarding the world of ETFs, make sure to be on the lookout for the next edition of the Dutram Report, and check out the many other great Zacks podcasts as well!
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