Ask any Wall Street analyst what they look for in a good investment and they’ll rattle off earnings figures, growth numbers, and ratios until you find a reason to excuse yourself.
Of course, financial analysis is important in choosing the right companies to invest in, but something that is very often overlooked is more qualitative things like company culture.
We’re not just talking about office pranks…
Company culture covers so many aspects of a business; from its overall philosophy to how it treats its customers and how it rewards its employees
It’s also not really possible to quantify in numbers, unlike Enterprise Value, which was discussed in yesterday’s Fastball. That is why company culture sits firmly within the right brain — or qualitative — part of an investors’ analysis.
As many investors will attest to, we don’t want to invest in ‘bad’ companies, whether it’s environmental reasons, controversial leaders, or poor treatment of employees. What’s more, studies have shown that a company with good culture is also more likely to beat the market over time.
A study by Glassdoor.com measured the performance of companies that ranked highly in its ‘Best Places to Work’ category, as well as those in the S&P 500 between 2009 and 2019. On average, Glassdoor’s stocks returned 20.3% per year, compared to 12.9% for the S&P 500.
Glassdoor is a great resource for investors who wish to gain insight into a company’s culture, but of course, this is just one important right-brain factor to consider. There’s a bit more to come…
Content Manager at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.