Invest in These Great Places to Work
Kiplinger's Personal Finance|February 2021
These companies do well by their workers, which can translate into gains for investors.
ADAM SHELL

LOVE YOUR JOB? LUCKY YOU. Being employed at a great place to work is a career plus. And if you’re an investor, there’s also good news tied to job satisfaction: Companies that treat their workers well are increasingly being viewed as good investments.

Of course, it’s vital for companies to increase their sales and profits to attract investors. But in a time when fair treatment of workers, racial equality and health safety protocols dominate the national discussion, a company’s people skills can rival its priceearnings ratio when evaluating a stock’s potential.

Investor attention to the workplace is more than a passing fad. Job perks that are good for workers—think competitive wages and benefits, a healthy work-life balance, ample family and sick leave, and a workplace culture committed to diversity and equal pay—also tend to boost a company’s bottom line. “Investing in your employees is going to pay off in the long haul,” says Jade Huang, a portfolio manager at Calvert Research and Management.

Higher returns. Quantifying the positive intangibles associated with human capital isn’t an exact science. But studies show a positive correlation between happy workers and strong stock performance. A 2015 study from Glassdoor, an employment website that compiles anonymous worker reviews, found that a portfolio of companies named to its “Best Places to Work” list returned 22.8% annualized from the start of 2009 through 2014, compared with 14.1% for the S&P 500 index. “The results,” the study concluded, “suggest an important economic link between company intangibles, such as employee satisfaction, and broader financial performance.”

Similarly, Bank of America research published in 2019 found that “Happy workers equal alpha.” (Alpha is Wall Street’s code word for benchmark-beating performance.)

Jerome Dodson, founder of mutual fund firm Parnassus Investments, has long believed in the merits of investing in companies that do well by their employees. In 2005, the firm launched a workplacefocused fund, Parnassus Endeavor (symbol PARWX). Decades ago, Dodson’s focus on workers was a rarity. “I would go around to companies and ask questions [about] how they treat their employees,” Dodson says. “Sometimes they would be taken aback, and ask, ‘Why are you asking those questions? You’re supposed to ask about the income statement and the balance sheet.’ ” Dodson stepped down from managing the fund at the end of 2020; the fund returned nearly 13% annualized over his tenure, compared with 10.0% for the S&P 500.

Today, an entire industry has been built around ESG investing, which views investment decisions through the lens of a company’s record on environmental, social and governance issues. Workplace matters are a big part of the social component of ESG. During the pandemic, many companies garnered attention depending on whether they stepped up to help employees and local communities navigate the crisis—or didn’t. Credit card processor Mastercard pledged no layoffs in 2020, for instance, and Home Depot boosted the amount of paid time off for its associates, paid weekly bonuses, and extended dependent care benefits.

Given the sharpened focus on the social aspects of corporate culture, and on workplaces in particular, we looked for companies that are not only great places to work, but also great investments. The five companies below made our list. (Stock prices, returns and other data are as of December 4.)

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