Great companies, the truly exceptional and successful in multiple regards, are not easy to find.
Were greatness determined by share price appreciation or revenue growth alone, winners wouldn't be difficult to ascertain. But to genuinely stand out requires more. Consider outsized dividend yields, margin expansion, debt management, board composition and company stewardship. Think about the intangibles that are hard to quantify but also really matter.
At the end of 2012 Yahoo! Finance named its very first "Company of the Year" from among all those listed in the U.S. To the extent possible, the goal was to uncover one publicly traded entity that rewarded shareholders, employees and customers in ways that set it apart on the corporate spectrum. Baseball has its MVPs, and we set out for the business world's equivalent. We picked Gap (GPS).
Gap was chosen as the 2012 Yahoo! Finance Company of the Year. (photo: Siemond Chan)
Now, having reached the halfway point of 2013, we're looking ahead to which company might take the crown this time around, and we want help from you in figuring it out. We've got a starter list below, but it's still anybody's contest.
How will we choose? The ideal company is going to have many or all of the following:
- Significant share price appreciation, in excess of its industry and the market
- An increased dividend payout since Jan. 1
- Growth in profits and revenue from the prior year
- Raised earnings or sales forecast
- A board of directors that’s made up of no more than one company insider
- Easily manageable debt levels
- Generous worker compensation and positive reviews from employees
- Respect from customers, vendors and competitors
- Concern for charitable endeavors or global citizenship, e.g., donating significantly to disaster relief or fighting for factory reform overseas
Most of these are numbers-based, such as change in revenue. Others are trickier to settle on — what counts as respect from one's peers and what's charitable enough?
The point is the Company of the Year isn't only about financials. Those certainly are critical, though so are corporate governance, stockholder rights and employee satisfaction. Being No. 1 in any of the areas highlighted above isn't a necessity, but performing admirably in several of them is.
In order to form a manageable list, many securities were excluded from consideration early on — microcaps and companies with extremely short operating histories were left out. These weren't only pink sheets issues either, as a number of Nasdaq and NYSE stocks were quickly out of the running.
Any company on the S&P 500 qualified for initial review, as did stocks with a minimum $1 billion market capitalization, provided they pay a dividend, have positive earnings and show a stock price increase of more than 20% year to date. Additionally, members of the Yahoo! Finance staff weighed in with a few names they felt warranted further monitoring in the months ahead.
With that in mind, midpoint candidates include, but are not limited to, Boeing (BA), H&R Block (HRB), Microsoft (MSFT), Kroger (KR), Best Buy (BBY), Tesla (TSLA), DSW (DSW) and LinkedIn (LNKD). MetLife (MET), j2 Global (JCOM) and Western Digital (WDC) also passed the first round.
They're not without flaws, with each having at least one considerable shortfall. For instance, professional network LinkedIn and car designer Tesla don't pay dividends, and the latter sports a 2013 price-to-earnings ratio above 2,000 based on its expected minuscule, first-time profit. Kroger, as a supermarket chain, doesn't offer high salaries to the rank and file. Airplane maker Boeing has had repeated problems with the Dreamliner.
Last year's victor, Gap, also wasn't a perfect choice. While its shares rose markedly, it raised its dividend and turned in solid profits, the San Francisco-based clothing retailer's thesis did have a few holes. Consider that because it's an apparel retailer with a large number of young workers, it doesn't offer sizable pay for many store-level employees.
A number of users let us know they weren't sold on Gap. Some readers felt Costco (COST) was a better pick. Apple (AAPL) was mentioned more than once as deserving of the title. Others simply let us know that they hated Gap, and they were astonished it could muster $15 billion-plus in sales and a 67% price surge in a year. (Incidentally, its stock is up another 29% this year.)
So this time, you're getting a say in advance. We're using essentially the same inputs, both quantitative and qualitative, to pick a single company that's doing things the right way — making money for its investors, respecting its employees and offering goods or services that please consumers. What's critical to remember is the choice needs to be about 2013, not a 50-year operating history. It's true that corporate citizenship would likely carry over from one year to the next, but the focus should be on the current year, not whether IBM is the best corporation of all time.
Look at the entire bio of the company, and tell us who you think is (or more precisely, will be at year end) the best. If you don't like that we kept out small caps or are picking on non-dividend payers, make the case for another company. The more details, the better. Also, feel free to go well beyond our points about what makes a stock worthy of being called Company of the Year.
You can get started now by voting in our poll, commenting below the article or sending an email to email@example.com between now and Dec. 15. The winner will be revealed the last week of the year.
- Investment & Company Information