This surprising investing strategy crushes the stock market without examining a single financial metric

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OPINION: By ranking competitors in each industry based on customer love and betting on the winner, I have made my portfolio beat the stock market by a factor of three to one.

I am not a professional stock picker, but over the past decade my portfolio has beaten the stock market by a factor of three to one.

To measure customer love, I used the Net Promoter Score that I created 20 years ago. It captures how likely a customer is to recommend a product or service to a friend or colleague. I relied on the market to incorporate all financial insights into the current stock price. In the years since, however, this group’s extraordinary customer focus has paid off. From Jan. 1, 2011 to Dec. 31, 2020 these stocks outperformed Vanguard’s Total Stock Market Index exchange-traded fund VTI, -0.91% by a factor of 2.8 to 1. .

For a long time, like many great customer-focused organizations, it remained below investors’ radar screens. One reason: GAAP accounting is woefully lacking at measuring customer centricity. It doesn’t even require organizations to report the number of customers they serve, let alone how many are returning, increasing purchases, or referring friends and family.

 

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