Adobe is an S&P 500 Leader in Shareholder-Friendly Practices 

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Adobe is an S&P 500 Leader in Shareholder-Friendly Practices 

New S&P Analysis: Adobe is an S&P 500 Leader in Shareholder-Friendly Practices

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Adobe Leads In Shareholder-Friendly Practices

According to a new analysis by S&P Global Market Intelligence, Adobe Systems is an S&P leader in shareholder friendly practices.

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  • Adobe checks all the boxes of key corporate management practices identified in a new piece of research conducted by the division's Quantamental Research team.
  • The analysis also shared the S&P 500 performers based on this newly released study and Home Depot, Activision Blizzard and Sherwin-Williams received top marks.

Here is the link to the press release featuring key highlights from the study: Four key CEO practices can increase corporate value, S&P Global Market Intelligence report finds

Sweet Spots in the C-Suite: Executive Best Practices

By Richard Tortoriello

Shares of Adobe Systems, led by CEO Shantanu Narayen, returned 36% YTD through October, one of the top performers in the S&P 500. What did Adobe do right? Over the past 12 months, the company posted gross profits to assets of 53% (well above peers), increased those margins by 0.4% year-to-year, and returned over $3 billion (15% of assets) to shareholders through share buybacks. It also avoided large M&A transactions, which typically destroy shareholder value. A new analysis conducted by S&P Global Market Intelligence Quantamental Research demonstrates empirically how key executive practices increase shareholder value over time.

In addition to ADBE, the table below highlights several S&P 500 out-performers that meet our executive best practices criteria. Despite a stock market that has been dominated by large-cap technology firms, these shareholder-friendly firms come from a diverse set of industries.

S&P 500 Executive-Best-Practices Top Performers, YTD through October (see Legend at bottom[1])

Adobe

Source: S&P Global Market Intelligence Quantamental Research. All returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. Past performance is not a guarantee of future results. Data as of November 15, 2020.

According to the report, firms where executives continually pursue the following policies have outperformed peers historically:

  • Top-performing CEOs not only prioritize profitability, but also understand that both the level and the trend of profitability matter.  Even small annual improvements in profit margins are treated positively by the market.
  • Good corporate managers strike a balance between profitability and growth. Companies that grow assets too quickly underperform, while low-to-moderate asset growth companies outperform.
  • Strategies that return cash to shareholders are rewarded by investors, while over-reliance on the capital markets is punished. Companies that issue shares and debt severely underperform. In addition, large M&A deals negatively affect fundamentals and returns, often for years following an acquisition. Stock-based M&A transactions perform particularly poorly.

Find the full study here: S&P Global Market Intelligence

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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