How do you find your investments and share market picks?
Many people use stock screeners such as the one offered by Commsec from the Commonwealth Bank of Australia (ASX: CBA).
They might look for companies with low PE ratios, high dividend yields and high returns on equity. With hundreds of companies listed on the ASX, it might be a start in filtering out the noise but it has no guarantees of helping you identify the best companies out there.
One metric that I like to consider when I select an investment is work culture. I like to understand what the employees of that company say about their experience working there and which are the best companies to work for.
Here’s why I think it’s important:
Employees are insiders. They know more about what is going on inside the company on a daily basis which could be more valuable than the periodic disclosures made by the company.
Employees implement the plan. Great businesses and strategies are meaningless without the right employees to execute the plan.
Top talent want to work in the right culture. The best businesses attract and retain the best talent. The best talent places a premium on working for a company with the right work culture.
Work culture is intangible. At a time when algorithms and artificial intelligence can be used to screen for shares, I think retail investors have a better chance of outperforming by identifying the qualitative factors that make a company great. Work culture is a part of that.
Here are some companies that were identified by LinkedIn as part of the top 20 best places to work in Australia and their share price performance on the last 5 years:
Macquarie Group Ltd (ASX: MQG). Its share price is up 155%.
Lendlease Group (ASX: LLC). Its share price is up 73%.
Cimic Group Ltd (ASX: CIM). Its share price is up 145%.
It’s not every company with a great work culture that will outperform the market. For example big banks Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) were on the list by they underperformed over the last 5 years.
I do think however that qualitative factors such as work culture are very much worth considering among other factors before deciding to invest in a company.
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You can follow Kevin on Twitter @KevinGandiya.
The Motley Fool Australia owns shares of National Australia Bank Limited. 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 Scott Phillips.