It would seem to be common sense that companies with happy customers would have satisfied investors as well. As such, customer satisfaction is a credible investment theme, one accessible via the American Customer Satisfaction ETF ACSI.
ACSI, issued by Detroit-based Exponential ETFs, is proof positive that satisfied customers can lead to happy investors. The exchange traded fund, which entered the all-time high club on Wednesday, is higher by nearly 21% year to date.
ACSI follows the American Customer Satisfaction Investable Index. That benchmark “utilizes proprietary customer satisfaction scores to weight stocks within each sector by their relative customer satisfaction scores,” according to Exponential.
The index gauges customer enthusiasm or lack there of for more than 350 brands from 150 large-cap companies.
Why It's Important
ACSI employs sector restraints, but as an ETF that serves as a barometer of consumer happiness, it's not surprising the fund features hefty exposure to consumer-driven sectors, such as discretionary, staples and communication services.
Not surprisingly, Apple Inc. AAPL and Amazon.com AMZN are among ACSI's top holdings. Those companies have enviable brand recognition and loyalty. In fact, Amazon and its recent earnings miss serve as case studies in customer loyalty and satisfaction, according to Exponential research.
“The overarching takeaway when looking at the history of Amazon’s earnings reports is that missing on EPS is not necessarily a bad thing, as long as they miss for the right reasons,” according to Exponential. “Amazon has been able to grow their top line sales so aggressively, in part because of their aforementioned singular and relentless focus on the customer.”
ACSI isn't actively managed, but its holdings do change as customer satisfaction ebbs and flows, but Amazon looks like a fixture in the fund.
“Perhaps better than any other retailer, Amazon delivers an easy and pleasant user experience. In just a few clicks, customers can buy virtually anything they desire and have it arrive reliably within 2 days at no extra charge (for Prime users),” said Exponential.
There are some surprises in ACSI, including some exposure to airlines, banks and utilities, companies that many investors wouldn't think are heavily associated with customer satisfaction.
Perhaps equally telling is that neither Facebook Inc FB nor Twitter Inc TWTR reside in ACSI. It may be time for those companies to reassess their views of customer happiness when banks and airlines are scoring better on that metric than those internet firms are.
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