The Importance Of Company Culture When Investing

Ask any Wall Street analyst what they look for in a good investment and they'll rattle off earnings figures, growth numbers and ratios until you find a reason to excuse yourself.

Of course, financial analysis is also important in choosing the right companies to invest in, but something that is very often overlooked is company culture. 

Company culture covers so many aspects of a business; from its overall philosophy, to how it treats its customers, to how it rewards its employees - and it's far more than just a nice idea. 

A recent study by Glassdoor.com found that company culture is incredibly important when it comes to returns for investors. 

The study measured the performance of companies that ranked highly in Glassdoor's "Best Places to Work" category, as well as those in Fortune 100's "Best Companies to Work For" between 2009 and 2014. 

The Fortune 100 companies outperformed the market by 84.2%, while Glassdoor's own category outperformed by 115.6%. 

Companies that ranked poorly in the category underperformed the market by 29.5% over the same time period. 

That's a huge difference and why we focus so much on good company culture in our showroom.

So how do you measure a company's culture?

Glassdoor.com is a great resource. There you can find company reviews from the employees themselves, as well as insights into how the CEO is viewed. Companies like Google, Facebook, Apple, Nike and Disney rank high on company culture overall, with Google being ranked "Best Place to Work" and "Best CEO." 

Chipotle, for example, has fostered the idea of "Food with Integrity."

Costco rewards loyalty by giving its customers huge discounts and its staff generous pay and benefits. Ever notice how much happier people are in Costco than Walmart?

Tesla is a company that puts purpose before profits. Elon Musk is more concerned with advancing sustainable transport than turning a quick buck, as shown by the move to open up their patents to competitors. You would think that would be a turnoff for investors, but on the contrary, Tesla has some of the most passionate and loyal investors, as well as customers.

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.