Index Origins
Each year FutureValue gifts its research to the educational charity, the Strategic Planning Society (SPS), so that the Society has access to rigorous, authoritative and comparable research data as the foundation for its 'Strategic Value in Corporate Reporting Awards'.
April 2008 was the first year of the full slate of SPS Awards. This is the starting point for the Index. The Index assumes that the same notional amount is invested in each short-listed company at the point when the company qualifies for the short list. Each year the new short-listed companies have been added to the index and those no longer short-listed have been removed. The findings were quite surprising.
It was the SPS that first recognised a potential correlation between the standard of strategy published in Annual Reports and stock market performance back in 2004 when FutureValue was first developing its reporting analysis process and research methodology. So, it was fitting for FV to look at the collective market performance of the companies short-listed for these SPS Awards, over the period in which the SPS has been making the awards, to see if there was still an evident correlation with stock market performance.
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The graph below shows the performance of a notional, simple index of short-listed companies since April 2008. |
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What do the three data lines represent? |
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The red line represents the performance of the FTSE350 index over the four years. It has gained 4.8% over the forty-seven months
The green line represents the full span of twenty-three short-listed companies for the 2011 Awards in March 2011 [the list excludes the SPS's two non-content online reporting awards]. At 29/02/2012 this 'Index' was 18.83% ahead of the FTSE350. Many of the constituents are typically 'one-hit wonders', making the 'Most Improved' or 'Best sustainability' short lists for just one year and with unexceptional market performance in many but not all cases
The blue line reflects the market performance of companies that have appeared in the SPS short-lists for three or more continuous years. There are eleven constituents. Of these seven appeared in the 2011 short-lists and are also components of the full Index represented by the green line. Four of the seven have been short-listed every year since the awards began. This three-year category of companies is a remarkable 76.21% ahead of the FTSE350 and clearly a driving force when included as constituents of the full Short-listed Companies Index.
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