On the minds of investors….
Barron’s World’s Most Respected Companies came out last week. It is a highly coveted list for companies and must please CEOs and boards. Barron’s lists are definitely worth following because the ratings are gathered from money managers, not consumers which seem to be the stakeholder of choice these days. Apple was number 1 this year which is not a great surprise. Interestingly, the writer mentions that the problems Apple has faced with FoxConn appear to only be a distraction for now. As always, the ups and downs of company reputations are revealing, particularly among this money-centric set. As much as I like the list, I like the write up more because there are usually interesting nuggets of information. This year, these stood out:
· Investors gave more thumbs ups to US based multi-nationals. Barron’s says that this is because of the outperformance of domestic stocks in a year of global tumult and the outperformance of quality mega-cap shares as global growth expectations diminished. Six of the top 10 are among the 30 members of the DJIA. This was more pronounced than usual. Even though the money manager sample is US based, Nestle managed to sneak into the top 10 which says a lot for that company’s prospects.
· What drives perceptions of the world’s most respected companies among this select set? Strong management and sound business strategy top the list, followed by business ethics, product innovation and then financial performance. In the past two weeks, it seems that I have had more conversations about Ethics and reputation than I usually do. I have been asked to define business ethics, trust and reputation and how they are interchangeable and need better defining. And as you see below, ethics ranks #3 among money managers in their respect for companies.
Most Important Attributes of Companies They Respect
Sound business strategy
Ethical business practices
Revenue and profit growth
· Russian and Chinese companies did not perform well in the rankings. Clearly there is a perception of “untrustworthiness,” says Barron’s.
· They predict that the global healthcare companies might be due for a reputational upgrade. Barron’s says that right now all the pharma companies are cast into one big “ugly” bucket of drug-patent expiration, reimbursement head winds and weak development pipelines. “Funny, it would seem a forward-looking investor could make the case that aging populations in the developed world and growing medical spending among the emerging middle-class could boost these giants’ fortunes in the coming years.”