A famous actor and former California governor once proclaimed in a movie that he'd be back. A famous tech company could have issued a similar statement last year, too, after it was booted from the top of a list of the world's most respected companies.
This year, Apple (NASDAQ:AAPL) reclaimed the crown in a survey of more than 100 institutional investors conducted by Beta Research. Apple was followed by Berkshire Hathaway at No. 2, Boeing at No. 3, and Google (NASDAQ:GOOG) at No. 4.
In the survey, institutional investors considered five nonfinancial factors in evaluating respect:
- Business strategy
- Competitive edge
Should retail investors do the same? Here's how some of the criteria can be applied to Apple and Google.
Apple's ingenious innovation
According to the survey, management might be the most important consideration when selecting a good stock -- and retail investors would be wise to appreciate it, too.
Apple lost founder Steve Jobs in 2011, but the company hasn't missed a beat. Current CEO Tim Cook surrounded himself with a great team of leaders and is continuing the legacy. A laser focus on providing great products keeps consumers coming back for more. Apple has a 76% retention rate for its flagship product, the iPhone, and the iOS ecosystem is providing a growing revenue stream derived from apps and other content.
According to the survey respondents, investor-friendly moves such as share buybacks and the reinstatement of the dividend propped up the stock when it went through a rough patch after the release of the iPhone 5 in 2012. Investors thought the company had lost its mojo. The new device a disappointment to some, and Apple's growth prospects were called into question.
Successful companies are innovators, and Apple is no exception. The iPod, iPhone, and iPad are three of the best consumer products ever developed, and the tech giant is rumored to be working on a possible fourth hit, the "iWatch," which could revolutionize the "Internet of things" and turn the do-it-yourself medical-diagnostics industry on its head, much like the iPod changed the music business more than a decade ago.
Things are looking up for Apple investors.
Google's strategy pays off
Without a solid high-level plan in place, it's unlikely that any company could profit and return value to shareholders.
Google's strategy has been to grow by developing services that generate revenue from ads that show up during Internet and mobile searches; the company derives 90% of its revenue from people's online curiosity.
One of the next steps in Google's plan is to grow by expanding the number of people who actually go online and use the company's services. Google has been investigating various ways to do that. For example, in hard-to-reach places, such as some parts of New Zealand, balloons that can beam wireless signals down to consumers are being tested. Drones and satellites are being considered as well. The company is rolling out a super-fast fiber-optic network, Google Fiber, in some areas of the U.S., and innovative products that might help down the road are always coming out of the "skunkworks" department, GoogleX.
Investors should continue to profit from Google's long-term vision.
Retail investors might want to take a page from Beta Research's playbook and consider five criteria when evaluating potential investments. Looking at management, ethics, strategy, competitive edge, and innovation could pay off for the little guy, too.
Leaked: Apple's next smart device (warning, it may shock you)
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Mark Morelli owns shares of Apple. The Motley Fool recommends Apple and Google (C shares). The Motley Fool owns shares of Apple and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.