Fortune recently released its annual list of "100 Best Companies to Work For." It's certainly a fun and interesting read for those of us who like to see how the companies we have an interest in (or maybe even work for) stack up. Of course, it's not merely a feel-good piece or a reason to get a case of sour grapes about the amazing perks other people get. A list like this can also be a useful research tool if you're seeking to invest in the very best businesses out there.
Some great investors theorize that without good employee relations, a company doesn't have much, and even less so over the long term. Take growth investing guru Philip Fisher. In Common Stocks and Uncommon Profits, and Other Writings, his "15 Points to Look for in a Common Stock" includes exemplary employee relations, ranked at No. 7.
It's a no-brainer, really. Companies that treat their workers well tend to have employees who seek to please customers and naturally evangelize to friends. Organizations that provide good health care and other solid benefits have higher productivity and, of course, lower turnover. Such companies attract high-quality people who are loyal and dedicated to product development efforts.
Though it seems like common sense, there are plenty of companies that don't offer their employees much in the way of benefits, or even consider their employees expendable. They may cite strict attention to the bottom line or industry norms, but that's the kind of short-term thinking that scares me.
Some exemplary examples
Also unsurprising was the high placement of two Motley Fool Stock Advisor selections, Whole Foods Markets
I own shares in both companies, and it's not just the innovation, impressive growth opportunities, and strong leadership that makes me think highly of these two as investments. Both also seem to recognize how important their workers are to their business, and their corporate cultures reflect that. These companies put an emphasis on providing health-care benefits, and both encourage employees to share in the company's corporate destiny by encouraging them to own company stock.
Given the fact that all three of these companies have exhibited enviable sales and earnings growth over the years, I'd say they are good examples of why employee-friendly policies work. All three have become superstars in their industries. It seems to me that for these companies, treating workers well has been an intrinsic part of building long-term, sustainable competitive advantage.
That's great, but what next?
When it comes to picking the superior stocks for the long term, good employee relations is a strong foundation -- and in my book, poor worker relations is a perfectly valid reason to remove a stock from a watch list -- but it certainly isn't the only criteria for finding those companies you should buy right now.
The Fortune list does provide a very diverse pool of public companies -- for example, Valero
If you don't have the time, or need some tutoring, Motley Fool Stock Advisor is an excellent resource. David and Tom Gardner identify great companies to invest in and hold for the long term. Their recommendations fulfill various criteria that smart investors look for -- companies with passionate, innovative founders on board; strong financials; solid valuations; and massive market opportunities to address, some of which aren't even on most investors' radar.
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