There is more to companies than dollars and cents. Companies are also about people.
Standard stock analysis focuses on financial returns, ratios, growth rates and other quantifiable variables, ignoring the people at the top who so influence -- positively or negatively -- a company's performance. That's because quantifying the quality of a company's leadership is difficult.
Glassdoor surveys employees of large companies, asking how much they approve of their CEO. It then lists the top 50 CEOs based on these approval ratings. When you buy stock in a company, have an idea of management's ability because its performance will very definitely affect how well the stock performs.
I analyze stocks using the strategies outlined by several of history's greatest investors. I cross-referenced Glassdoor's top CEOs and their companies to the companies earning high ratings from my strategies and found three that overlapped. Buy into these companies and you not only get a top financial performer, but first-rate leadership. Talk about a winning combination.
Ranked second Glassdoor's survey, with a 97% approval rating, was Alan R. Mulally, head of Ford (F). (FYI, Jeff Weiner of LinkedIn (LNKD) was first with a 100% approval rating.) Ford is a favorite of my James P. O'Shaughnessy-based value strategy because of Ford's large market cap ($57 billion), strong cash flow per share ($1.90), huge number of shares outstanding (more than 4 billion) and humongous sales ($145 million). Among the companies that pass these tests, the strategy recommends the top 50 based on their dividend yield. Ford's 3.38% yield places it in this top-50 grouping.
Membership warehouse behemoth Costco (COST) is favored by my growth-oriented O'Shaughnessy strategy. It's highly-thought-of CEO, Craig Jelinek, earned a 95% approval rating (No. 6) in Glassdoor's survey. The strategy likes the company's large market cap ($62 billion), earnings per share, which have increased in each of the past five years, a price-to-sales ratio of 0.54, which is well below the 1.5 maximum allowed, and a relative strength rating of 74. This last variable is a measure of how well the stock has performed in the past year vs. the others making up the market.
Paul E. Jacobs is CEO of Qualcomm (QCOM), which makes chips for smartphones and owns patents widely used in 3G and 4G mobile phone networks, from which it earns royalties. Jacobs is the fifth-highest rated CEO in Glassdoor's survey, with a 95% approval rating. A strategy I created based on the writings of Peter Lynch is a big supporter of Qualcomm. Its primary variable is the P/E/G ratio, which is price-to-earnings relative to growth, and measures how much the investor is paying for growth. A P/E/G up to 1.0 is acceptable and Qualcomm's 0.71 is well below this ceiling, making this a well-priced stock. Also in Qualcomm's favor: zero debt.
A good way to start the New Year is to employ the power of strong leadership, stellar financial performance and well-priced stocks.
At the time of publication, Reese and his clients were long F, QCOM and COST.