Trust is a keystone to all good relationships— those between investor and the company in which the investment is placed, between creditors and the recipients of credit, between customers and businesses they patronize, employees and the workplace, suppliers and with whom they contract, and more.
Trust affects both our ability to engage in relationships and, in many cases, the cost of maintaining those relationships. Where there is a lack of trust, we substitute contracts, regulations, checks and balances, and intervention. Where there is substantial trust, on the other hand, we allow freedom to operate and to innovate. Trust is earned and can easily be lost. So, its importance cannot be overstated.
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A list of the most trustworthy public companies in the United States was published this week, identifying organizations that have demonstrated through various measures to be worthy of trust from key parties in relationships with them. Through consideration of dozens of factors in five key areas of Financial Governance, Environmental, Social & Corporate Governance (ESG), Quality, Relative Risk, and Market-Implied Governance, more than 1,500 companies were assigned Trust Ratings from TGF Analytics -- the firm that produces this analysis -- and rank-ordered.
Among the largest 500 companies in the dataset, 53 earned A+ ratings, while among companies with a market capitalization below US$5 billion, 12 more were given the highest possible grade. Topping the list of large cap companies were:
- Best Buy Co Inc
- Intuit Inc
- Adobe Systems Inc
- The Home Depot Inc
- Nike Inc.
- Ross Stores Inc
- F5 Networks Inc
- Boeing Co
- Rockwell Automation Inc
- S&P Global Inc
And the top five with market caps below US$5 billion were
- Deckers Outdoor Corp
- Louisiana-Pacific Corp
- UniFirst Corp
- Usana Health Sciences Inc
- Texas Roadhouse Inc
Less than 5% of publicly traded companies earned an A+ Trust Rating from TGF Analytics. You can see the complete list of 65 companies by clicking here.
Market Performance of Identified Companies
A static portfolio of the most trustworthy public companies from September 1st, 2017 returned nearly 26%, almost 8% in excess of the broad market, and realized a Sharpe Ratio that was close to 40% higher. In contrast, an equally weighted portfolio of the least trustworthy public companies from that date experienced volatility that was 50% higher than the broad market and realized a Sharpe Ratio that was nearly 20% worse.
TGF Analytics stresses that it is not giving investment advice with these rankings but does provide unique risk insights on publicly traded companies via its methods and products. More information on TGF Trust Ratings can be found on the TGF Analytics website at https://tgfanalytics.com/trust-ratings.
David R. Koenig is the Founding Principal of TGF Analytics, a data analytics firm that assesses the trust in and governance of publicly traded companies as the Founding Principal of (b)right governance, an advisory firm to boards and c-level executives around the world. He is the author of Governance Reimagined: Organizational Design, Risk, and Value Creation (John Wiley & Sons, 2012), is a Research Fellow and member of the Executive Advisory Board of the Center for Corporate Performance at the IIT Stuart School of Business in Chicago, an editorial board member and special editor at the Journal of Risk Management in Financial Institutions, the founder of two global professional associations, and has decades of experience helping organizations to take risk better. He serves as a Governance Advisor to GoChain, a blockchain technology company.
This report is provided solely for information.
This report does not constitute tax, investment or other advice. Neither this report nor the information contained in it should be relied upon.
TGF Analytics does not aim to provide advice which is appropriate to the individual circumstances of the private investor. Use of this report is not a substitute for obtaining proper investment advice from an authorized investment professional. While the information contained herein has been obtained from sources deemed reliable, neither TGF Analytics nor any party through whom the reader obtains this report guarantees that it is accurate or complete or makes any warranty or representation with regard to the results obtained from its use. In addition, the information contained in this report may become inaccurate as a result of the passage of time and should therefore be read for historical information only.
TGF Analytics makes no warranty or representation that this report or its contents are current or that they have been updated based on changes in the economic market or other factors. In particular, but without limiting the preceding sentence, statements of fact or opinion made by TGF Analytics in this report may not be up-to-date and may not represent the current opinion of TGF Analytics.
When used in this report, the terms "we," "our" or "us" mean, unless the context otherwise indicates, TGF Analytics.