Why you should avoid Bendigo and Adelaide Bank Ltd, Woolworths Limited and Coca-Cola Amatil Ltd
In addition to the traditional metrics of analysing a company, there are also the more qualitative aspects to determining whether or not a company’s shares should be bought or not.
Perhaps one of the most powerful forward-looking indicators for the success of a company is whether the company’s reputation has any standing in the eyes of its customers.
Recently, research consultancy AMR published its annual Reputation Index in the Australian Financial Review which is an annual study that measures the reputation of Australia’s 60 largest organisations.
The most recent survey consisted of 7,457 consumers who provided important feedback to determine the relative rankings of corporate reputations in Australia. But what’s interesting to note for me at least is not so much the absolute ranking of each organisation, but the relative movement in the rankings between 2015 and 2016.
Three companies with big falls in customer satisfaction and trust for 2016 are:
Bendigo and Adelaide Bank Ltd (ASX: BEN)
Bendigo and Adelaide Bank ranked 7th on last year’s list but has fallen 15 places since the index was published in 2015. In addition to AMR’s 2016 ranking of 22 (down from 7) are online product reviews where 56% of review ratings rate the bank as either “Bad” or “Terrible”.
I don’t mean to pick on Bendigo and Adelaide Bank, and of course there is always a proportion of customers who will be dissatisfied with their bank, but AMR’s research is important in that it shows up the dramatic decrease in confidence Bendigo and Adelaide Bank’s customers have in it.
For the record, the Bendigo and Adelaide Bank’s share price has drifted downward over the last year from $12.45 to $10.06 today.
Woolworths Limited (ASX: WOW)
It’s been a tough 12 months for Woolworths. It lost its CEO, there was the announcement that the Masters hardware chain is to be wound up due to unacceptable losses, there has been a series of profit warnings, and it bungled its customer relations when it restructured its Qantas rewards program for discounts on food. Similarly to Bendigo and Adelaide, this has received an avalanche of complaints.
It’s no wonder that angry shareholders have marked down its share price from $29 a year ago to $22.73 today.
There’s also the matter of increased competition, and it’s no surprise to see that perhaps its most dangerous competitor, Aldi, has jumped in the AMR rankings by 1 to a very acceptable 7th, a good 33 places above 40th-ranked Woolworths.
Coca-Cola Amatil Ltd (ASX: CCL)
Perhaps the biggest challenge for Coca-Cola Amatil, and its parent, The Coca-Cola Company in the US, is the perception that its flagship brands, Coca-Cola, Fanta, and the like are on the nose with consumers given its products are linked to obesity.
The company is diversifying its product base into mineral water and ice tea drinks, amongst others, in an attempt to become more of a general bottling company, perhaps with a view to eventually diversifying away from its iconic flagship brands.
But I agree with the market and I’m lukewarm on the company’s prospects due to the general perception that a sizeable proportion of its brands are considered to be unhealthy to the population at large. It’s currently ranked at 46, and is down from 32 in 2015.
Each of the three companies above has their own competitive and regulatory challenges, but when you combine these with a fall in confidence and the trust of its customers, it might be prudent to step back and avoid the business-risks these companies may present to your portfolio.
Discover the 'new breed' of blue chips that could take your portfolio higher in 2016
Forget Woolworths! These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.
The report is free! No credit card required.
HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!
With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!
Motley Fool contributor Edward Vesely has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
In addition to the traditional metrics of analysing a company, there are also the more qualitative aspects to determining whether or not a company?s shares should be bought or not.
Perhaps one of the most powerful forward-looking indicators for the success of a company is whether the company?s reputation has any standing in the eyes of its customers.
Recently, research consultancy AMR published its annual Reputation Index in the Australian Financial Review which is an annual study that measures the reputation of Australia?s 60 largest organisations.
The most recent survey consisted of 7,457 consumers who provided important feedback to determine the relative rankings of corporate reputations…