From Alex Edmans at Wharton comes the study Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices (emphasis added):
This paper analyzes the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the “100 Best Companies to Work For in America” earned an annual four-factor alpha of 3.5% from 1984-2009, and 2.1% above industry benchmarks. The results are robust to controls for firm characteristics, different weighting methodologies and the removal of outliers. The Best Companies also exhibited significantly more positive earnings surprises and announcement returns. These findings have three main implications. First, consistent with human capital-centered theories of the firm, employee satisfaction is positively correlated with shareholder returns and need not represent managerial slack. Second, the stock market does not fully value intangibles, even when independently verified by a highly public survey on large firms. Third, certain socially responsible investing (“SRI”) screens may improve investment returns.
Read the full paper here. For those who want to get started on analyzing companies that might have undervalued intangibles, you can check out the 2011 list here (Not all are public):
| Rank | Company | Job growth |
U.S. employees |
|---|---|---|---|
| 1 | SAS | 3% | 5,629 |
| 2 | Boston Consulting Group | 2% | 1,713 |
| 3 | Wegmans Food Markets | 6% | 39,255 |
| 4 | N.A. | N.A. | |
| 5 | NetApp | 9% | 5,455 |
| 6 | Zappos.com | 37% | 1,843 |
| 7 | Camden Property Trust | 0% | 1,719 |
| 8 | Nugget Market | -2% | 1,240 |
| 9 | Recreational Equipment (REI) | -1% | 9,380 |
| 10 | DreamWorks Animation SKG | 10% | 1,994 |
| 11 | Edward Jones | 2% | 35,987 |
| 12 | Scottrade | 19% | 2,884 |
| 13 | Alston & Bird | -12% | 1,611 |
| 14 | Robert W. Baird | 5% | 2,406 |
| 15 | Mercedes-Benz USA | -3% | 1,657 |
| 16 | JM Family Enterprises | -2% | 3,688 |
| 17 | USAA | -1% | 21,889 |
| 18 | Stew Leonard’s | -7% | 1,991 |
| 19 | The Methodist Hospital System | 2% | 11,298 |
| 20 | Cisco | 3% | 36,612 |
| 21 | Container Store | -3% | 3,338 |
| 22 | DPR Construction | -7% | 1,073 |
| 23 | Goldman Sachs | 7% | 13,154 |
| 24 | Whole Foods Market | 3% | 52,915 |
| 25 | Umpqua Bank | 18% | 2,154 |
| 26 | Plante & Moran | -4% | 1,478 |
| 27 | CHG Healthcare Services | -5% | 1,124 |
| 28 | Bingham McCutchen | 7% | 1,607 |
| 29 | Quicken Loans | 4% | 3,179 |
| 30 | NuStar Energy | 4% | 1,419 |
| 31 | W. L. Gore & Associates | 1% | 5,770 |
| 32 | Chesapeake Energy | 10% | 8,529 |
| 33 | Qualcomm | 2% | 12,520 |
| 34 | QuikTrip | 5% | 10,936 |
| 35 | Genentech | 3% | 11,464 |
| 36 | Southern Ohio Medical Center | 18% | 2,276 |
| 37 | Scripps Health | 5% | 11,847 |
| 38 | PCL Construction | -4% | 1,323 |
| 39 | American Fidelity Assurance | -1% | 1,495 |
| 40 | Balfour Beatty Construction | 37% | 2,079 |
| 41 | Devon Energy | -10% | 3,508 |
| 42 | Baptist Health South Florida | 5% | 12,249 |
| 43 | Shared Technologies | -3% | 1,192 |
| 44 | Intuit | -3% | 6,475 |
| 45 | TDIndustries | -11% | 1,429 |
| 46 | Johnson Financial Group | -4% | 1,259 |
| 47 | Novo Nordisk | -1% | 3,340 |
| 48 | Build-A-Bear Workshop | -7% | 4,250 |
| 49 | American Express | -3% | 26,329 |
| 50 | Baker Donelson | 1% | 1,127 |
| 51 | Intel | -1% | 42,694 |
| 52 | Salesforce.com | 15% | 2,725 |
| 53 | Four Seasons Hotels | N.A. | 11,729 |
| 54 | Atlantic Health | 5% | 7,418 |
| 55 | Perkins Coie | 2% | 1,726 |
| 56 | Millennium: The Takeda Oncology Company | 11% | 1,269 |
| 57 | Aflac | 0% | 4,400 |
| 58 | General Mills | 1% | 16,803 |
| 59 | Hasbro | -4% | 3,055 |
| 60 | Children’s Healthcare of Atlanta | -1% | 6,521 |
| 61 | Mayo Clinic | -1% | 41,068 |
| 62 | OhioHealth | 4% | 12,529 |
| 63 | Deloitte | -1% | 38,493 |
| 64 | FactSet Research Systems | 3% | 1,355 |
| 65 | Adobe Systems | 18% | 4,788 |
| 66 | EOG Resources | 5% | 1,811 |
| 67 | Publix Super Markets | -1% | 141,217 |
| 68 | Stryker | -2% | 8,389 |
| 69 | Mattel | -2% | 5,161 |
| 70 | S.C. Johnson & Son | -1% | 3,310 |
| 71 | Marriott International | -4% | 106,280 |
| 72 | Microsoft | -4% | 53,410 |
| 73 | PricewaterhouseCoopers | -4% | 28,168 |
| 74 | Nordstrom | 19% | 49,447 |
| 75 | Arkansas Children’s Hospital | 2% | 3,776 |
| 76 | Gilbane | -9% | 1,761 |
| 77 | Ernst & Young | -7% | 23,102 |
| 78 | SRC/SRCTec | 9% | 1,054 |
| 79 | National Instruments | -1% | 2,545 |
| 80 | St. Jude Children’s Research Hospital | -1% | 3,557 |
| 81 | CarMax | 3% | 13,436 |
| 82 | Teach For America | 10% | 1,236 |
| 83 | Kimpton Hotels & Restaurants | 6% | 6,735 |
| 84 | Bright Horizons Family Solutions | -4% | 13,737 |
| 85 | Booz Allen Hamilton | 9% | 23,294 |
| 86 | KPMG | -5% | 19,892 |
| 87 | Men’s Wearhouse | -1% | 14,548 |
| 88 | Meridian Health | -8% | 8,004 |
| 89 | Brocade Communications Systems | 8% | 3,112 |
| 90 | CH2M Hill | -12% | 13,486 |
| 91 | The Everett Clinic | 4% | 1,633 |
| 92 | Rackspace Hosting | 14% | 2,405 |
| 93 | J. M. Smucker | -4% | 4,157 |
| 94 | Aéropostale | 7% | 16,589 |
| 95 | Morningstar | 14% | 1,224 |
| 96 | MITRE | 2% | 6,686 |
| 97 | Darden Restaurants | 21% | 167,537 |
| 98 | Starbucks | -5% | 103,425 |
| 99 | Accenture | 4% | 31,000 |
| 100 | W. W. Grainger | -3% | 13,699 |
Talk to Frank about this study
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