Outliers of the WSJ Management Top 250

In one of those meh everyone-gets-some-kind-of-award supplements the Wall Street Journal reported the Drucker Institute’s top 250 “best managed” companies.

There are five criteria: customer satisfaction, employee engagement, innovation, social responsibility, and financial strength. The categories are batting only 3-5 out of the gate. “Social responsibility” might be strike against management in some consideration, and Financial Strength can also be read different ways. If you have a good management team and good opportunity, shouldn’t you be levering up? Each of the 250 companies (of 752 reviewed large cap publicly traded firms) got star ratings on a 1-5 scale for each of the five categories: 1,250 total ratings. Grade inflation ran rampant: only 6% of them were a 1 or 2.

Usual tech suspects take the first seven positions. They’re willing to divest from Indiana if not Saudi Arabia which might help their responsibility score, and are throwing off oodles of patents and cash. Since they’re not restaurant chains of course they’re going to invest in their employees.

As one’s eyes’ roam down the printed page, I find it only interesting to pick out the outliers. Who are the unloved runts of the litter?

Of the 1,250 ratings there are only four one star ratings:

DXC Technology (DXC: $66) for Employee Engagement

Phillip Morris International (PM: $83) for Customer Satisfaction

Berkshire Hathaway (BRK-B: $220) for Social Responsibility

Comcast (CMCSA: $39) for Customer Satisfaction: no surprise there.

There are only 75 two star ratings (from my possibly erroneous hand count), highlights:

Amazon (AMZN: $1772) for Social Responsibility

General Electric (GE: $7) for Financial Strength (not 1? This maybe bankrupt once glorious stalwart is the eighteenth best managed company? $10 says their rating on this front was a four or five not very long ago.)

Wal-Mart (WMT: $99), and McDonalds (MCD: $186) for Employee Development. Wal-Mart and McDonalds have probably trained a fifth of America how to work in a corporate job. (I’m pulling that number out of my ### but it probably is enormous.) Wal-Mart openings in depressed areas can have a greater ratio of applicants to positions than Harvard. Training entry level workers to show up on time (and profit share!) is development of a different kind than Google’s and should be on a different scale.

Walt Disney (DIS: $116) for Customer Satisfaction. Wut?? Is there a chemical plant next to a population center also named Walt Disney? Are some people unhappy that ESPN is bundled in the cable plan? Talk to Comcast (see above).

Hewlett-Packard Enterprise (HPE: $15) gets two 2 star ratings (Employee Development, Financial Strength) yet still slides into a tie for 114th

The biggest laugher is Take Two (TTWO: $108) as a 2 star innovator. They’re redefining the cutting edge of open world gaming, providing the analogies for Elon Musk that’s its likely we’re living in a simulated world. This is the same rating given to fast food companies that haven’t changed how they or anyone else does business in many decades.

 

 

Berkshire Hathaway Media Holdings 1977

Berkshire Hathaway has issued shareholder letters every year since 1977.  I was reminded by this of Joe Kraus’ investing tips which included the recommendation from David Siminoff to read all of Warren Buffett’s letters.   In 1977 the holdings (which you could have gotten for $131, preparing for your 1,000x return over the next 25 years) were surprisingly for me concentrated in media companies both on the content side (Capital Cities, Knight Ridder, Washington Post) as well as the agency side (Ogilvy & Mather, Interpublic Group); 5 out of effectively 7 investments that were publicly held.  Privately BRK owned the Buffalo Evening News as well.  Knight Ridder appears to be flipped the following year, and Capital Cities exchanged for ABC (well before the 90s takeover, I’m not sure what happened there).  Still as a window into the 20th century’s greatest investing mind it’s nice to see a strong window of support into media.

No. of Shares Company Cost Market ------------- ------- -------- -------- (000’s omitted)
    220,000    Capital Cities Communications, Inc. ..... $ 10,909   $ 13,228  
  1,986,953    Government Employees Insurance 
                  Company Convertible Preferred ........   19,417     33,033  
  1,294,308    Government Employees Insurance 
                  Company Common Stock .................    4,116     10,516
    592,650    The Interpublic Group of Companies, Inc.     4,531     17,187  
    324,580    Kaiser Aluminum& Chemical Corporation ...   11,218      9,981
  1,305,800    Kaiser Industries, Inc. .................      778      6,039
    226,900    Knight-Ridder Newspapers, Inc. ..........    7,534      8,736
    170,800    Ogilvy & Mather International, Inc. .....    2,762      6,960
    934,300    The Washington Post Company Class B .....   10,628     33,401
                                                         --------   --------
               Total ................................... $ 71,893   $139,081
               All Other Holdings ......................   34,996     41,992
                                                         --------   --------
               Total Equities .......................... $106,889   $181,073

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