New investing model provides a 1077% return in the past 13 years?
The Great Places to Work has identified 50 companies that have consistently outperformed stock markets and the bullion market from 2008 to 2021.
If you are an institutional or retail investor and had invested Rs 1,00,000 in companies identified by the Great Places to Work from 2008 to 2021 under the Hold Model, you would have a whopping 1077 per cent return. These returns would be far higher than the 282 per cent return on the BSE Index and 277 per cent on the Nifty 50 during the same period.
Even investing in the bullion market, gold and silver, would have yielded returns of 241 and 156 per cent, respectively.
Moreover, if you had put your hard-earned money in the Replacement Model like the Hold Model, both jointly developed and implemented by consulting firm RSM Institute and the global research, consulting, and training firm, the Great Place to Work Institute, investors would have still earned a 1042 per cent, compared to the 339 per cent return that would have come from the CNX-NIFTY-Total Returns Index.
The companies included Dr. Reddy's Laboratories, Bajaj Finance, Godrej Consumer Products, and many more to be added to the list.
To evaluate the investor value created by "India's Best Companies to Work For", the Institute used two models, the Reinvestment Model and the Hold Model. The results of these models were then compared to the BSE Sensex 30, NSE Nifty 50, and CNX NIFTY (Total Returns Index points). It also looked at bullion, gold, and silver prices for the same period up to March 31, 2021.
The companies were chosen from the Top 50 list of India's Best Companies to Work For from 2008-2012 and the Top 100 list for 2013-2021. July 2008 to June 2009 was taken as the base period because starting in 2008, a list of Top 50 companies was consistently published. Only companies listed on the NSE and BSE were taken up.
Speaking about the study, Yeshasvini Ramaswamy, CEO of Great Places to Work, said: "We had conducted a similar study from 2013 to 2021, and this is the tenth year of such research study. It has been proven yet again that the cumulative returns of publicly listed workplaces as identified by Great Place to Work Institute's list of 'India's Best Companies to Work' outperformed major stock indices and yield a significantly higher return on investment.
"The returns for shareholders have outperformed market indices by a factor of three and have yielded 10X returns on the initial investment in Reinvestment Model and 10X returns on the initial investment in Hold Model."
As the list of "India's Best Companies to Work For" is issued in June every year based on the study for the preceding financial year, the investment period for the research study, which includes evaluation of share market returns in terms of capital appreciation and dividends, is taken from April 1, 2020, to March 31, 2021 (FY 2020-21).
Under the Reinvestment Model, Rs 1,00,000 was equally invested in equity shares on the first trading day of July 2008, at the closing price of listed companies, which is mentioned in the list.
The model also considered the year-on-year impact of a stock split, bonus, and dividends paid by the companies. This portfolio was liquidated every year on July 1, 2009, and the total amount, the proceeds plus the dividends, is reinvested equally next year in companies that find a place in the newly published list of Best Companies to Work For.
The second is the Hold Model, where the Rs 1 lakh is equally invested on the first trading day of July 2008 into equity shares (at closing prices) in the list, as per the published list of 2008 and is held up to 2021.
The total return at the end of 13 years includes the market value of shares with split, bonus, and the total dividends during the period.
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