Do Trustworthy Public Companies Outperform the S&P 500 Over Time?
Over 10 years ago, and in the wake of the financial crisis, we set out to test the following hypothesis: Over time, trustworthy public companies will outperform the S&P 500.
The first task was to create a framework to gauge and evaluate trustworthy behavior. Over the course of a year, and with the assistance of dozens of professionals across a number of functional specialties, we arrived at a consensus on how trustworthy business behavior could be evaluated and ranked, and the FACTS® Framework was born.
Publicly available data allows us to combine our five factors which are equally weighted in our model:
- Financial stability and strength
- Accounting Conservativeness
- Corporate Integrity (Governance)
- Transparency
- Sustainability
In order to test our hypothesis, every year since 2011 I selected a sample of ten of the most trustworthy companies and published this “Top10” list on our blog. Based on 10, 5 and 3 year returns, our hypothesis is proving correct. The most trustworthy public companies outperform the S&P 500 over time.
Here are the results using VectorVest as our analytics tool.
