I’ve always been skeptical of “most admired companies” articles – popularity contests whose outcomes may depend on who is ranking the companies and on what basis, as well as which firms or industries have had a recent run on Wall Street. Give me fundamentals over popularity. But the cover story in Barron’s this week, “The Market’s Finest,” offers a couple of useful insights for investor relations people. Barron’s polled 70 portfolio managers in U.S. buy side firms, a fair sample of our institutional audience.
It’s all well and good that Johnson & Johnson scored No. 1 in the rankings, followed by Procter & Gamble, Toyota Motor, Berkshire Hathaway and Apple in the top five. (The survey covered the world’s 100 largest companies – so most of us never had a chance and shouldn’t feel regret. See the article for the full list of 100.)
Of more interest to me are the “most important factors” that money managers say shape their views. In order of importance:
… Strong management
… Sound business strategy
… Ethical business practices
… Competitive edge
… Product innovation
Well, maybe the latest quarterly earnings enter the picture somehow. But the enduring influences are quality and integrity of management, along with business strategy and two of its main levers: competitive advantage and product innovation.
And Barron’s observes:
As in years past, this year’s ranking illustrates the fact that corporate respect must be earned over a span of decades. While scandals or corporate-governance abuses quickly can empty a company’s reservoir of goodwill with investors and others, highly respected companies tend to retain their strong marks even during lulls in stock performance or profitability.
Surely these managerial and strategic characteristics should rank near the top among messages that IR professionals focus on disclosing, explaining and (should we say it?) “selling” to the market.