Does Admiration Lead to Higher Stock Returns?

Fortune recently released their 2012 annual ranking of the 50 most admired companies.  The list was compiled by asking businesspeople to vote for the companies that they admired most, from any industry.

Several rivals in the same industry dominated the rankings, but does more admiration lead to higher stock returns?

Apple Inc. (NASDAQ:AAPL) topped the list at number one for the fifth consecutive year, with rival Google Inc. (NASDAQ:GOOG) close behind in second place.  Shares of Apple have gained 31 percent this year and more than 450 percent over the past three years, easily outperforming Google.  Shares of the internet search giant are down 5 percent this year, but up 90 percent in the past three years.  Apple has also outperformed Microsoft Inc. (NASDAQ:MSFT), which ranks 17 out of the most admired companies.

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In the soft drink world, Coca-Cola Co. (NYSE:KO) still remains the beverage of choice for consumers and investors.  The carbonated drink maker ranked as the fourth most admired company.  Fortune explains, “The soda industry may be struggling, but Coke has managed to hold strong through the storm. The beverage giant leads the industry in market share despite sales of its original Coca-Cola brand having slowed in North America.”  Meanwhile, its long time competitor PepsiCo Inc. (NYSE:PEP) ranked 32.  Although Coca-Cola shares are down 1 percent this year, it is still performing better than Pepsi shares, which have fallen 5 percent year-to-date.  Over the past three years, Coca-Cola and Pepsi have gained 68 percent and 29 percent, respectively.

Online commerce continues to heat up as companies compete for customers.  Amazon Inc. (NASDAQ:AMZN), the world’s largest online retailer, ranked third in the most admired companies.  Fortune said, “Unlike many other large tech companies, Amazon is comfortable sacrificing profits in the short-term for long-term gains. That’s why, despite the fact that 2011 revenues climbed to $48 billion, net income dropped 55 percent to $631 million.”  While customers enjoy reduced prices, shareholders do not.  Amazon shares have increased only 4.2 percent this year, while eBay Inc. (NASDAQ:EBAY) has gained 18 percent.  EBay ranked 41 on the most admired list.  In the past three years, Amazon shares have surged 163 percent, but still falls short of eBay’s 200 percent gain.

Despite viral web videos showing employees tossing packages like a rag doll, FedEx Corp. (NYSE:FDX) and United Parcel Service Inc. (NYSE:UPS) made the list of the top 50 admired companies.  FedEx ranked as the sixth most admired company, while UPS came in at 29.  Fortune explains, “While the global carrier faced some recession-related setbacks, it fared better this year. FedEx serves as a bellwether for the economy in general, and it seems as if people are shipping again.  In December 2011, FedEx reaffirmed its positive guidance for 2012. And in the first quarter of 2012, FedEx boosted its net income to $497 million, up 76% from the same period the previous year.”

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com