Mirror, Mirror: Hacienda Index Reflects Success of Park Companies

For 13 years now, the Hacienda Index, published monthly in NETWORK, has been offering a snapshot of the market performance of the publicly traded companies in the park. While intended purely as "fun with numbers" entertainment-in no way should it be interpreted as investment advice - the Index is nevertheless an interesting vehicle for tracking the success of a rather select universe.

The Index made its debut in January 1998, the contribution of Certified Financial Planner Marion Steward. "The concept grew out of the desire to create a fun way to gauge the general business health of companies in the park. It has no investment dimension. Rather, it is just anecdotal evidence of what is happening at the time," Steward relates.

The Index is based on a technique called dollar-weighted averaging, the same method used to compile the Dow Jones Industrials average or the S&P 500. At its origin, the Index was assigned an arbitrary baseline of 1,000, rather than the actual cash value of each stock. It presumes ownership of 100 shares of every public company, or in some cases the parent company, located in Hacienda. To even out the disparity in company size and share price, the stock price movement of each business has the same impact on the Index.

Steward notes that many organizations and money managers create indices to follow a specific business sector or geographic region. One aspect that sets the Hacienda Index apart is the turnover in composition, a factor over which there is no control. Roughly 18 of the original 76 companies remain on the list, while 50 new names have made their appearance. Arrivals and departures are reflected via imaginary stock "purchases" and "sales." "The roster of companies here changes often," she says, "so it really is about tracking very general trends."

Despite its limitations, the Index has done a pretty good job of mirroring overall market performance in the U.S. Broader indices reveal that the general domestic market reached its peak between April and October 2007, Steward says. Coincidentally, or concurrently, the Hacienda Index hit a high of 1,925.29 in June 2007. In a parallel vein, most analysts see March 2009 as the bottom of market. The Index that month stood at 1,135.47, its lowest point since 2001. Two years later, in March 2011, it had bounced back to 1,681.86.

Steward finds the recent upward trend gratifying. "It is fun to see the companies that have done very well. We can look back and see their progress and say, 'good for them.'" She also finds the monthly report to be a good foil to the daily barrage of information. "You can't make a judgment based on one day's news," she points out. "One of the first principles of investing is to think long term. A monthly feature offers great balance to the day-to-day ups and downs."

Over the years, the Index has added the "Pink Sheets" market to its list of exchanges, a change that highlights a little known fact about stock symbol conventions. "Companies on the New York Stock Exchange typically have one, two, or three letters, but as they move to other exchanges, the ticker symbol gets longer," Steward points out. You can observe this difference first-hand in this month's index .

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