Picture this: You're at your desk, looking at your investment portfolio and wondering, "What's the secret to picking stocks that'll soar to the moon?" The answer might be simpler than you think. Get ready to learn about the unexpected connection between company reviews and stock performance. You'll never look at investing the same way again.
- The Hidden Power of Employee Satisfaction
It all starts with the people behind the company. You might be thinking, "Sure, a happy workforce is nice, but how does that translate to stock performance?" Well, research by Edmans (2011) found a significant positive correlation between employee satisfaction and stock performance. In other words, companies with happy employees tend to outperform their less satisfied peers.
Why? Happy employees are more productive, innovative, and likely to stick around. This trifecta of benefits can work wonders for a company's bottom line and, ultimately, its stock price.
- Glassdoor: A Goldmine of Information
So, where do you find this valuable data on employee satisfaction? Look no further than Glassdoor. This popular platform allows employees to anonymously review their employers, providing invaluable insights into a company's culture, management, and overall work environment.
With over 70 million reviews, Glassdoor can be an investor's best friend (Chamberlain, 2018). The key is to identify companies with high overall ratings and positive trends in employee satisfaction. These are the stocks with the potential to outperform.
- The Proof is in the Numbers
Still skeptical? Let's look at some real-world examples. Back in 2016, Facebook topped the Glassdoor Best Places to Work list, boasting a 4.5 out of 5-star rating (Chamberlain, 2016). Since then, the social media giant's stock price has skyrocketed, making early investors very happy.
On the other hand, take a company like Wells Fargo. In 2016, the bank was embroiled in a fake accounts scandal, leading to plummeting employee satisfaction ratings on Glassdoor. Unsurprisingly, its stock price underperformed the market in the years that followed (Egan, 2018).
Coincidence? I think not.
- Use Company Reviews as a Secret Weapon
Of course, company reviews shouldn't be the sole factor in your investment decisions. But when used in conjunction with traditional financial analysis, they can provide a powerful edge. Savvy investors know the importance of considering both the quantitative and qualitative aspects of a business.
Don't underestimate the power of a satisfied workforce. The next time you're researching potential investments, take a few minutes to dig into company reviews. You might just discover a hidden gem poised for outstanding stock performance.
Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics, 101(3), 621-640.