The looming monthly jobs report from the Bureau of Labor Statistics -- while a tidy measure on the state of the U.S. economy -- may be one of the most overrated insights into where investors' investments are heading in terms of value.
Personally, I have grown to dislike the jobs report in the era of live Twitter analysis from pundits sitting in their mom's basement and how it's spun into leading to XYZ decisions by the Fed. It wasn't always like this, and it has led to a rise in the noise swirling around after the report each month. Noise equates to confusion, and that could turn into bad decision-making by investors that place too much emphasis on a number that is very often revised and never as good, or as bad, as it seems on a Friday at 8:30 a.m. ET.
So, what is important to me when choosing a stock? Learning about a company's culture, from the C-suite right onto down to the lower-level employees who carry out the game plans of the lavishly compensated. There is, unfortunately, no magic bullet to figure out an internal culture; investor calls will only take you so far. Figuring out a culture is basically done through one-on-one conversations with executives and the aforementioned lower-level employees. Here is a list of qualities that define a good culture, based on me being in the trenches.
Calculated risk-taking: Apparel giant V.F. Corp. (VFC) is perpetually on the hunt for acquisitions. That is especially the case now that it has revived the Timberland boot brand purchased a few years ago. So, with tons of cash sitting on the books, why isn't the company out there gobbling up perceived threats to its venerable brands like North Face, Timberland and Vans? Simple: The executive team refuses to overpay and acquire companies that are similar to its own leading brands, a byproduct of the tight collaboration among team members that ensures a huge risk isn't taken that could bring down the whole ship (and sink the share price). This type of discipline, along with a long-time CEO at the helm who has a proven record of value creation, should give a person great confidence when a company such as V.F. Corp. eventually does pull the trigger.
Being absurdly ahead of rivals: Not a week goes by it seems where I don't read about a new, futuristic project at Google (GOOGL) or a patent filed by Apple (AAPL) for a cool technology that makes tons of sense -- five years into the future. Starbucks (SBUX) is the only company doing what it's doing on same-day delivery in the fast food business. Or, outside of Silicon Valley and fast food, Foot Locker (FL) is moving aggressively to erect shops by Puma and Nike inside of its stores to stand out in the mall. If it appears as if a company out-thinking its rivals, there is a good chance it's a function of highly motivated key individuals thriving in a particular culture designed to win.
A useful measure to determine culture is operating profits per employee. Select five companies in a sector with similar business models, and calculate (excluding items) operating profits per employee from the past five years (use the annual reports). Then, compare their stock prices and tenure of senior leadership.
I am not going to pretend I know anything about biotech stocks, but I would keep a close eye on this group in concert with the Dow Transports to see if a larger pullback is brewing. Fed Chair Janet Yellen's comments Friday were universally shrugged off by the market, but they could come back to haunt hot areas of the market if the March jobs report beats and upward revisions are received (confusing the trend). Both biotechs and transports have underperformed the major indices in the last five sessions, as seen in the chart below.
Source: Yahoo! Finance
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