When it comes to investing in stocks, I like to look at things that others might miss. Things that are not so easily defined or measured, you could say.
Many investors, for example, look at the PE ratio of a company or the items on it’s balance sheet. Some investors might look at chart patterns, or projections of earnings.
All these things are valuable, of course. And they help to paint a clearer picture for what a stock might be worth. But the problem with these types of measurements is that they are also what everyone else tends to be looking at.
Which is why I try to look for other, more qualitative factors to aid the decision making process. Factors that might require more discretion, guesswork, or experience.
(This type of process also reminds me of the book Laughing at Wall Street, where author Chris Camillo beats the market by keeping an eye on social media, visiting shopping malls, and listening to conference calls. It’s a good book and worth the read if you have the time.)
But that aside, I got thinking about different ways for analysing stocks and I started to think about what a company really is and what drives a business forward.
And I realised that companies are essentially just large groups of people. I figured that the happier that group of people feel, the better the company is likely to do.
I thus came up with the idea that maybe the best companies to work for are actually the best companies to invest in. And maybe the worst companies to work for are the worst companies to invest in.
In order to answer this question I decided to gather some data from the employee review site Glassdoor. If you don’t know Glassdoor, it’s basically a site where you can log in and leave anonymous reviews of your employer. As a result, the company has been able to store up a lot of interesting data on employee satisfaction.
So, I decided to take the best and worst rated companies on Glassdoor and see what stock returns those companies have experienced over subsequent years.
Best Companies To Work For 2012
In 2012, Glassdoor revealed the best 50 companies to work for in America based on various metrics of employee satisfaction. Top place went to Bain & Company while the highest publicly listed company was Facebook.
In the table below, you’ll see the 2012 best 11* companies to work for and their subsequent share price performance starting from 8/11/2012**:
(Note that I omitted any company on the list that was not listed on one of the major US exchanges.)
As you can see from the results, the best publicly listed company to work for in 2012 according to employee ratings on Glassdoor was Facebook. Investing in the company would have given a 77% return in one year and a 240% return over three years.
If you had invested $1000 into each of the 11 best rated companies in August 2012 you would have made a 20.28% return on investment in the first year and a 61.62% return over three years.
Worst Companies To Work For 2012
Now we come to the worst rated companies in 2012 and for this I took data from 24/7 Wall Street which was originally gathered from Glassdoor.
In the table below, you’ll see the 2012 worst 11 companies to work for and their subsequent share price performance beginning 8/11/2012:
As you can see from the results, the worst company to work for was reported as Dish Networks $DISH. Investing in DISH would have actually given a 1-year return of 47.57% and a 3-year return of 102.84%. A good result for investing in the worst company to work at.
Further, if you had invested $1000 into each of the worst rated companies in August 2012 you would have made a 67.46% return on investment in the first year and a 109.76% return over three years. Thus you would have outperformed the list of best rated companies.
Users on the site Glassdoor voted the company unfavourably, citing poor middle management, below average pay, and strenuous, and irregular hours.
Best Companies To Work For 2013
In 2013, the top rated companies to work for in America was fairly similar to 2012 and the winner was Facebook.
In the table below, you’ll see the 2013 best 9 companies to work for and their subsequent share price performance starting from 7/20/2013:
The best company to work for in 2013 was Facebook. Investing in the company would have given a 166% return in one year and a 276% return over two years.
If you had invested $1000 into each company on the list in August 2013 you would have made a 29.84% return in the first year and a 49.73% return over two years.
Worst Companies To Work For 2013
Now looking at the worst companies to work for in 2013 you can see that there are a couple of new entries such as Express Scripts $ESRX and Dollar General $DG. The table shows the 2013 worst 9 companies to work for and their subsequent share price performance beginning 7/20/2013:
If you had invested $1000 into each of the worst rated companies in August 2013 you would have made a 0.75% return on investment in the first year and a 6.84% return over two years.
Following are the overall average results presented on a chart:
First of all, it is hard to draw too many conclusions from these results since we would naturally prefer a larger sample size. However, data like this has not been available for very long.
On one level, you could say that the results are slightly disappointing. In 2012, the best companies to invest in were the companies that were actually the worst places to work, which suggests a contrarian/ turnaround type strategy should be preferred. However, the finding is reversed in 2013, where the worst companies to work for produced sub-standard returns.
One thing we might say is that the worst companies to work for tend to produce more volatile returns than the best places to work. In our investigation, there was one company (RadioShack) that went to zero, and this was reported as one of the worst companies to work at in both 2012 and 2013. It is unusual for companies to go into bankruptcy during bull markets so this finding must be insightful.
Using this data on it’s own might not be a particularly wise strategy for investors. But perhaps the data could be combined into some form of composite indicator in order to gauge the strength of a company?
Overall, the information does seem valuable and the companies that are voted the best places to work appear to be the safer investments.
Personally, I would rather put my money in those companies with the happiest employees.
* Start dates reflect the day of release of the worst companies list and are used in order to avoid look-ahead bias.
** Number of companies used chosen according to the number available on the worst companies list in order to avoid confusion.
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Joe Marwood is an independent trader and the founder of Decoding Markets. He worked as a professional futures trader and has a passion for investing and building mechanical trading strategies. If you are interested in more quantitative trading strategies, investing ideas and tutorials make sure to check out our program Marwood Research.
This post expresses the opinions of the writer and is for information or entertainment purposes only. It is not a recommendation or personalised investment advice. Joe Marwood is not a registered financial advisor or certified analyst. The reader agrees to assume all risk resulting from the application of any of the information provided. Past performance, historical or simulated results are not a reliable indicator of future returns and may not account for real world settings. Financial trading is full of risk and margin trading can lead to financial losses totalling more than what is in your investment account. We take care to present accurate analysis but mistakes in backtesting and presenting of analysis regularly occur. Please read the Full disclaimer.
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