On Being Satisfied

Barry Ritholtz, one of my favorite stock market observers/advisers, has uncovered a very interesting study. It's the kind of thing that, when you read it, you say to yourself "well duh". But yet, it's not the kind of thing that I would have thought of as an investor:

Here's an interesting thesis on how to beat the market: Buy Companies With High Customer Satisfaction Scores. The consumerist summarizes the findings:

Using a back-tested paper portfolio and an actual case, the authors of a study published in the Journal of Marketing found that companies at the top 20% of the the American Customer Satisfaction Index (ACSI) greatly outperformed the the stock market, generating a 40% return.

The portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.

Well, duh.

I know a whole bunch of stores/companies that could learn something from this.

Barry correctly points out that not all companies have contact with the public and therefore using this type of screen wouldn't give you a comprehensive portfolio. But it's sure a good place to start.