Studies show that great workplaces enjoy lower turnover and better financial performance than industry peers. But do these companies really achieve greater financial success over the long haul? Here I'll examine whether companies praised by their employees also receive applause from shareholders.
Fortune magazine publishes a list of the "100 Best Companies to Work For" every year. In order to make the list, the companies are evaluated using a model developed by the Great Place to Work Institute. The model claims that employees value six attributes: trust, credibility, fairness, pride, respect, and camaraderie. The companies are rated based on what actions they take to foster these attributes in their work environments.
Just less than half of the companies on the list operate as either private businesses or non-profit entities. Some private businesses, such as Wegmans Food Markets, Container Store, and Edward Jones, have materialized near the top of the list for more than a decade. For my cursory analysis, I concentrated on the publically traded companies.
Crunching the numbers
For the 51 publically traded companies on the list, I homed in on the ones that consistently secured spots on the Fortune list over the past decade. That left me with a tidy group of 13 companies: five tech companies, four consumer goods producers, two financial-services providers, one retailer, and one telecom. I compared the performance of the five tech stocks to PowerShares QQQ, a surrogate for the NASDAQ 100 that takes dividend reinvestment into account, over the one-year, three-year, five-year, and 10-year periods. I compared the remaining eight non-tech stocks to the SPDR S&P 500 (NYS: SPY) , which I used as a proxy for the S&P 500.
The tech stocks outperformed the PowerShares ETF in the one-year and 10-year periods. Over the 10-year period, the basket of tech stocks outperformed the PowerShares ETF by nearly 60 percentage points -- 183% total return, versus 125%.
For the non-tech stocks, the SPDR ETF actually outperformed in each period except the 10-year period, when the basket returned 107% total return, versus 58% for the SPDR ETF.
Google (NAS: GOOG) -- so prevalent it's a verb -- secured the coveted No. 1 spot on Fortune's list. Applauded by employees for its nap rooms and onsite haircuts, the leading Internet search provider grew its workforce by 33% last year. And its stock performance has been nothing shy of amazing: It has quadrupled the performance of the PowerShares ETF since Google went public in 2004. The advent of Google Drive, the company's foray into cloud computing, positions the company well for the future.
Feel-good food retailer Whole Foods Market (NAS: WFM) also displayed impressive growth. Amazingly, Whole Foods pays 100% of its employees' health care premiums. The company posted performance five times better than the SPDR ETF during the one-year, three-year, and 10-year periods -- and an incredible 20 times better than the SPDR ETF during the five-year period. This grocer, known for good deeds among its employees and customers, continues to post impressive same-stores sales numbers and is positioned well for further growth.
Not too shabby
Toymaker Mattel's (NAS: MAT) stock appreciated significantly over the past decade with a 119% total return, pummeling the SPDR ETF's 58% total return. Mattel employees benefit from a compressed workweek schedule and on-site child care. Mattel continues to focus diligently on its international expansion and has been rewarded success, as overseas sales grew nearly 12% in 2011. And since the stock price recently pulled back, consider adding shares while the stock's on sale.
You gotta be kidding me
Despite its recent floggings in the press, I was shocked to find Goldman Sachs (NYS: GS) not only resting comfortably in the No. 33 spot for this year, but consistently appearing on the Fortune list. Not surprisingly, the biggest benefit cited was the pay; the average annual salary for a non-exempt professional employee is $139,200. The company lost a lot of ground in the one-year, three-year, and five-year periods, when its stock price dropped precipitously due to poor business decisions and a grave macroeconomic environment. Over the 10-year period, the financial-services company saw a total return of 60%, which only slightly edged out the SPDR ETF's 58% return during the same time period.
The mere appearance of a company on the Fortune list does not warrant investing money in its stock. Admittedly, my results are inconclusive, but I think they provide an interesting springboard to further scrutinize companies. Based on what I found, though, I'd put my money on Whole Foods. It has enjoyed amazing financial success for itself and for its shareholders. Its business model is impressive, and the company still has room to grow. But don't take my word for it -- dig in and see what you find.
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At the time thisarticle was published Fool contributorNicole Seghettidoes not own shares of any of the companies mentioned. She feels The Motley Fool should appear on the list (among other reasons, two words: Pizza Day). The Motley Fool owns shares of Whole Foods and Google and has sold shares of SPDR S&P 500 short.Motley Fool newsletter serviceshave recommended buying shares of Goldman Sachs, Whole Foods, Mattel, and Google, as well as creating a bear put spread position in Mattel and a ratio put spread position in PowerShares QQQ. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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