Barron’s published an article in mid-August that discussed how the best employers are the best stocks to buy.
Jefferies Financial Group (NYSE:JEF) analysis found that the stocks of the companies on the annual Fortune list of top 100 workplaces had consistently outperformed their peers since 1998 when the list was started.
“Analysts led by Aniket Shah, head of global ESG strategy, found that including dividend reinvestment, the 100 companies on Fortune’s list outpaced the S&P 500 by more than 5% annually,” Barron’s contributor Teresa Rivas wrote on Aug. 14.
“That group was up 2,286% from Jan. 12, 1998, to Thursday, compared with a 664% increase for the index, a difference that equates to a compound annual growth rate of 5.33% over that period.”
It should not come as a secret to investors that this is the case.
How often do you read about an institutional investor, hedgie, or analyst gushing about how great a particular management team is? I see it all the time.
You know what they say? Leadership starts at the top. If management creates a positive work environment, employees are happy to come to work each day. Act like tyrants, and they’re not. It’s human nature.
So, the next time you look at a touchy-feely list like the Fortune 100 Best Companies to Work For, remember that this is where some of your best investing ideas will come from.
Here are three I’d bet on for the long haul.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is my first of three picks from the best employers in America. To make my list, a company had to provide paid days off for volunteering. That’s non-negotiable.
Nvidia does this. It also provides 60 days for adoptive leave, 60 days for paternal leave, and 110 days of maternal leave, all fully paid. It’s incredible to think that all large businesses don’t do this.
I’ve been a fan of Nvidia CEO and co-founder Jensen Huang for years. I’m not a big tech geek, but Huang’s confidence to take significant risks about where the chip market is headed is impressive. He’s literally dragged the tech world into artificial intelligence.
In March 2020, while markets were imploding, I suggested that Nvidia’s financial strength made it an attractive stock. It’s up 625% since then. Even a blind squirrel finds a nut once in a while.
By the time this is published, Nvidia may have reported its Q2 2023 results. Whatever happens, it remains a quality stock to own and one of the best employers to work for.
Box (BOX)
Box (NYSE:BOX) is my most unexpected pick of the three. Unless I’m mistaken, I’ve never written about Box in the past decade. For me, it’s one of those companies you know, but not really. So why did it make my list of best employers?
The content collaboration cloud-based software platform has been public for nearly nine years. Over this time, its stock is up 115%. A double sounds nice, except that the S&P 500 is up almost the same amount.
Isn’t Box a tech stock? How could it be that it’s only been able to match the index over nearly a decade?
Well, when you have people in the business media like me — paid to watch companies and industries — completely losing track of their business, it’s easy to understand how it happened. It didn’t tell a compelling enough story.
Perhaps it should focus more on the fact that it’s an excellent place to work, finishing 27th on Fortune’s 2023 list.
Meanwhile, its business appears to be getting more profitable if its Q1 2024 results are any indication.
In the first quarter, its sales rose 10%, excluding currency, to $252 million, exceeding its guidance. It finished the quarter with remaining performance obligations (RPOs) of $1.18 billion, 19% higher than a year ago.
On the bottom line, it had a GAAP operating margin of 3.3%, up 300 basis points from a year ago, with a 19% free cash flow increase to $108 million.
By virtually every metric, it’s cheaper than ever but more profitable. That makes it a buy, in my opinion.
Mastercard (MA)
It’s always Mastercard (NYSE:MA) or Visa (NYSE:V). Which do you go for?
Visa is ranked 49th on Fortune’s list compared to the 93rd spot for Visa. However, 42% of Mastercard employees are minorities, 16 percentage points higher than Visa. Otherwise, as workplaces, they’re pretty similar. Let’s see why I chose MA for my best employers list.
So far in 2023, Visa stock leads MA by 128 basis points, up 16.0% year-to-date. However, over the past five years, Mastercard’s performance leaves Visa in the dust, up 90.0%, 35% higher than V.
On Aug. 14, Mastercard announced it would buy a minority stake in MTN Group’s (OTCMKTS:MTNOY) fintech division. MTN is the largest cell phone service provider in Africa.
It is paying $5.2 billion for the investment in MTN Mobile Money, which obtained a mobile banking license in Nigeria, MTN Group’s largest market. As part of the investment, MTN will utilize Mastercard’s payments and remittances infrastructure throughout each of its African markets.
In terms of global markets, Africa is the last frontier. The continent is ready to come alive and grow commercially. Mastercard’s investment will help it reap the benefits.
It’s an intelligent bet laying the seeds of growth. Betting on Mastercard is an excellent way to play fintech.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
