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BEAT THE

MARKET:

INVEST IN THE GREATEST WORKPLACES

AND WHAT ARE THE 7 GREATEST?

Beat The Market:

Invest in the Greatest Workplaces

If we were given just a single sentence to describe the most
effective way for an investor to beat the market, it would be
this:
Buy shares of great businesses at attractive valuations and
hold them for the long term.
This report is focused on helping investors find those great
businesses... for the long term.
And it might seem relatively simple. What about Disney
(NYSE: DIS), Starbucks (Nasdaq: SBUX), and Google
(Nasdaq: GOOG) those are great businesses, right? Well,
thats hard to say. After all, 10 years ago, you might reasonably have claimed that The New York Times (NYSE: NYT),
Borders Books, and Office Depot (NYSE: ODP) were great
businesses. But a portfolio of those three companies wouldve
lost you nearly 90% of your investment money. A 90% loss
over 10 years. . . it doesnt get much worse than that.
For the last 20 years, our primary goal at The Motley Fool has
been to limit these sorts of negative outcomes while identifying the worlds greatest long-term winners. And weve been
pretty good at it, with substantial outperformance across our
investment services. Our flagship Stock Advisor service alone
has beaten the S&P 500 by more than 60% over 10+ years.
One of the primary reasons for our success is that we believe
that workplace culture is a crucial, yet largely overlooked,
performance factor. Most investors disregard it. And, frankly,
so do most corporate executives. After all, we live in a world
where Gallup research shows that more than 70% of all employees say they are disengaged in their daily work. That is a
shocking and depressing statistic. Its also a value-destroying
dynamic that acts as a competitive disadvantage at your
average company.
At The Motley Fool, we know that an incredible culture in
which talented people come to work inspired by a worthy
mission, challenged by their responsibilities, and rewarded
for their successes is a game-changer over the long term.
Attracting, developing, and inspiring top talent is the leading
asset at great organizations, particularly in our increasingly
knowledge-based economy.
And so if you want to reduce your exposure to long-term
losers, we believe you should increase your research into
workplace cultures.

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The Data
In our observation, the purest read on workplace cultures
comes via the web service Glassdoor, founded in 2007.
Glassdoor is a free service for users, is easily accessible for
anyone, and has become the go-to place for company reviews
and ratings. Among other data, it houses more than 5 million anonymous reviews by past and present employees of
more than 75,000 organizations. Employers cannot control
what is shared about them nor do they know from where any
one review comes from. Therefore, employees can publish
without fear of recrimination.

Lets Look at Some Results

Glassdoor recently released its annual 50 Best Places to
Work list for 2013. Of those 50 companies, 33 are public and
listed on major U.S. stock exchanges. Heres what a portfolio
of these stocks would have returned over the past 1-, 5-, and
10-year periods.

1 Year Total Return

5 Year Total Return
10 Year Total Return

Glassdoor
Portfolio
34.12%
150.79%
509.82%

S&P 500
19.14%
60.01%
106.56%

Source: S&P Capital IQ, authors calculations. Returns from 9/24/2013,

dividends included.

Massive returns from companies like Apple (Nasdaq: AAPL),

Akamai Technologies (Nasdaq: AKAM), and Cummins
(NYSE: CMI) help push up the 10-year return, but the implication of the data is clear: happy employees have helped to
create outsized value for their companies.
Now, of course, we would never exclusively use this data
or even workplace culture to guide our investment
decisions. That would be absurd. A companys strategy, its
financial performance, its competitive position, the valuation
of its stock, and many other factors influence our decisions.
But it makes sense that the engagement levels of employees
would positively affect long-term value creation. We take it
very seriously.

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Looking Forward

Not Surprisingly...

Next, lets take a forward-looking view of Glassdoors 50

Best Places to Work starting in 2009, the first year that
Glassdoor released the list. Each portfolio below consists of
the stock of every public company on that years Best Places
to Work list, purchased on the first day of trading that particular year:

As it turns out, Glassdoors 50 lowest-rated companies list

also appears to be predictive this time of companies that
could be in deep trouble. The list of the worst from 2009
included such names as Borders, Blockbuster, and Circuit
City, all of which have since filed for bankruptcy. In fact,
the lowest-rated company on that list, DHL Express (USA),
packed up and went home, ceasing operations in the U.S.
several years ago.

TOTAL RETURN
2009 Best Places to Work
2010 Best Places to Work
2011 Best Places to Work
2012 Best Places to Work
Annualized Return

GLASSDOOR
PORTFOLIO
198.32%
71.48%
40.06%
57.22%
21.18%

S&P 500
101.94%
64.76%
43.19%
40.23%
16.52%

Source: S&P Capital IQ, authors calculations. Returns from the first trading day
of the year through 9/24/2013, dividends included.

Considering that most professional investors and mutual

funds underperform the market each year and over time, an
advantage of 4 percentage points per year over the S&P 500
is profound.
Further, we believe that its no coincidence that the portfolio of
companies on the 2009 Best Places to Work list is beating the
market by the widest margin. Happy and engaged employees
in their jobs 4-5 years ago have been driving outsized value
for longer. Theres been more time for their effectiveness to
materialize in the stock price.
In fact, none of the companies on the 2009 list have declined
over that time period. And Whole Foods (Nasdaq: WFM),
an Everlasting Portfolio stock in Motley Fool ONE, provides
the best example of how a great company culture can help
generate extraordinary returns. The company was the biggest
gainer on the 2009 list. Its stock has risen over 800% since
the beginning of 2009. Shares are up more than 20% per year
since Whole Foods came public all the way back in 1992.
Thats a stunning performance, both recently and sustained
for decades, by a company whose employees love it.
We are firm in our belief that workplace culture is an excellent contributor to the long-term creation of value at public
companies, and were confident this belief is and will continue to be supported by the data. It is certainly not the only
contributor, but it is an important one, made more meaningful
because it is overlooked on Wall Street. Active traders and
most professional hedge funds simply wont consider this
factor, given their trigger-finger approach to the markets.
Workplace culture doesnt affect the stock price over the next
minute, hour, or day so these experts simply dont care.
And that gives us a rare leg up on the Wall Street herd!

Motley Fool ONE

Further Confirmation: The Fortune

Study
Perhaps the most well-known of these best places to work
lists is Fortunes 100 Best Companies to Work For in America.
Wharton professor Alex Edmans recently conducted a study
published in the Academy of Management Perspectives on
the effect of worker satisfaction on corporate financial performance using years of Fortunes 100 Best Companies to Work
For lists. He found that from 1984-2011, annual returns for
these 100 Best Companies to Work For beat the broad market
returns by 3.8% annually when controlling for risk.
Again, one of the added reasons that high worker satisfaction
can lead to higher returns is the fact that Wall Street hasnt
caught on yet (and given its approach to high-octane trading,
it may not ever catch on).

The Seven Most Highly-Rated

Workplace Cultures at Public
Companies
As rated anonymously by their past and present employees,
these seven public companies are more highly rated than any
others (with at least 25 approved reviews in the past year).
We do not advocate blindly buying these stocks. We do,
however, recommend very serious research into the following
companies:
1. Facebook (Nasdaq: FB)
2. Riverbed Technology (Nasdaq: RVBD)
3. Google (Nasdaq: GOOG)
4. National Instruments (Nasdaq: NATI)
5. Southwest Airlines (NYSE: LUV)
6. Chevron (NYSE: CVX)
7. LinkedIn (NYSE: LNKD)

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Conclusion
One of the most effective ways for investors to beat the market is to take advantage of Wall Streets inherent flaws. Among the
best ways to take advantage of Wall Streets short-termism is to buy stocks on irrational dips and commit to holding most of them
for years and years (if not decades).
And you now understand why we advocate this second advantage the strength of a companys workplace culture. Most
professional investors are simply too myopic, too obsessed with stock prices this instant, to have any interest in a factor that
aligns closely with superior performance over the long term. We thank them for that.

Take the next step with Motley Fool ONE

Glassdoor is just one of the many qualitative tools Tom Gardner is using on a day-to-day basis to find the absolute best companies
for his Everlasting Portfolio. And its this kind of way off Wall Street thinking that has allowed him to hand Motley Fool ONE
members 59.9% gains not to mention, beat the market by nearly 30% since he launched this portfolio in June 2012.
After closing our early acceptance enrollment period, a few final spots remain open alongside Tom in Motley Fool ONE. If
youd like to claim one of them with no risk or obligation for an entire year and start taking advantage of all of the other
unusual tools Tom is using to deliver his members such impressive gains, simply click here to access your private invitation.
Or, if youd like to see answers to some of the thousands of questions investors like you have submitted to Tom and his team over
the past few weeks, please feel free to visit the special Q&A section of our Motley Fool ONE homepage which we are opening
to investors like you free of charge for the next few days.

Tom Gardner owns shares of Starbucks, Google, and LinkedIn. The Motley Fool owns shares of Facebook, Google, LinkedIn,
Riverbed Technology, Starbucks, Walt Disney, and Whole Foods Market.

Motley Fool ONE

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