How to Use Glassdoor's Employee Survey to Pick Stock Winners

Who knows a company -- any company -- better than the employees who work for it?

There's no need to answer. That's actually a rhetorical question, and the answer is "Nobody." So if you're wondering about a company's business prospects, and the prospects for its stock price, there's probably no better guide you could hope for than a bit of insight from the folks who spend most of their waking hours working for that company.

As luck would have it, those folks are more than happy to share that insight.

Over at online jobs and career community Glassdoor, they just published the results of a survey of employee sentiment at some of the world's most popular companies. This is information that could prove a gold mine for stock market investors looking to separate winning companies from the losers.

'Talking Their Book'

In investing circles, there's a concept known as "talking your book." It basically translates as saying nice things about the stocks you own (or the company you work for, and perhaps own stock options in), in hopes of gulling the rubes into thinking it's worth more than it really is -- so that you can cash out at a profit.

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It's not nice behavior, but here's the surprising thing -- in Glassdoor's survey, very few employees actually do "talk their book" about the companies they work for.

In fact, that across the 250,000 companies that Glassdoor covers, only 38 percent of employees are saying publicly that they believe their companies' prospects will improve over the next six months.

This fact alone lends extra credibility to the few employees who are pointing at their own employers and whispering to you: "Psst! Over here! This company I work for, Google (GOOG)? We're different. We're actually doing pretty well."

Google Class

I'm not picking Google's name out of a hat. In fact, Google tops the list of companies scoring well in the eyes of their employees.

Fully 86 percent of the Internet search giant's employees say they expect Google's prospects to improve over the next six months. That's more than twice the average percentage. It's at least 10 percentage points better than the No. 2 and No. 3 finishers on Glassdoor's survey -- Qualcomm (QCOM) and Yahoo (YHOO), respectively.

More interesting still, a grand total of 0 percent of their employees who took the survey -- not a one of them -- thinks these three companies' businesses will deteriorate over the next six months.

Rather than keep you in suspense, let's take a look at the rest of the list of Glassdoor's top 10 companies with the best business outlooks:

What's It Mean to You?

It's all fascinating information. But how do you put it to use?

The most obvious way to make the most of Glassdoor's survey results is to start taking a good, hard look at the companies where employees are most optimistic, with an eye to buying the stocks.

Google, Yahoo, General Motors (GM), Home Depot (HD) -- all of these companies have outperformed the stock market over the past 12 months, which lends support to their employees' expressions of confidence.

But there may be an even smarter way to play this data.

On this list, in addition to the already-winners named above, are several companies whose stocks have not, in fact, outperformed the rest of the stock market -- nor even matched its returns.

If you really want to make some money in the stock market, and if you believe what their employees are telling you, there might be even greater profits to be found in a few of the market's recent laggards -- Amazon (AMZN), Whole Foods (WFM), and Qualcomm.

Trust, but Verify

Personally, I plan to take good, hard looks at each of these three businesses in the months ahead, with an eye to buying. But I'll also be watching, and wondering, if the stocks will in fact perform as well as (their employees have) promised.

And here's my promise to you: In six months, I'll come back and lay out the results in a follow-up column. Stay tuned.



Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, General Motors, Google, Home Depot, and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Google, Qualcomm, and Whole Foods Market.