The key aim of investors is to beat the Index, such as the FTSE 100. Why? Because if you can’t beat the index, then you may as well invest in an index-tracker. Most fund managers do not beat the index – which is extraordinary given that they are paid lots of money to try. Little wonder private investors prefer DIY.
What if you could pick a stock which keeps on beating the Index, month in month out, year in year out? Would that be possible, if not necessarily wise? I mean a British company not some fad US dot-com.
I was asked recently to be one of the few men to be an Ambassador for Women Empowered, launched by the effervescent Reena Ranger Ahuja – an organisation promoting…well… empowerment of women. Having co-authored a book, ‘Our Turn: the ultimate start-up guide for female entrepreneurs’ I was delighted, honoured and privileged to accept.
Looking at my fellow Ambassadors I noticed Ruby McGregor-Smith CBE of MITIE Group. Her biography on the Women Empowered website states “As the only Asian female Chief Executive in the FTSE250, and running a company that aspires to join the FTSE 100, I know how important it is that people of all backgrounds have the opportunity to reach their potential. I really believe that MITIE’s success is a direct result of the collective experiences, talent, perspectives, cultures and unique attributes of our people. As part of this, attracting future female talent is of key importance. We are always working hard to create a culture where differences are not merely accepted, but valued; where everyone has the opportunity to develop themselves and reach their potential.”
So I wondered do companies run by women, an Asian woman, with such a gender equality initiatives outperform other companies? Or is it an indulgence at the shareholder’s expense? Of course there are too few such companies for my experiment to be statistically significant, but I thought I would check the share price performance of MITIE. I wasn’t expecting anything special, after all the mighty testosterone world of banking and Barclays could not manage to raise their share price after 15 years, so what chance MITIE?
Hmmm…the MITIE share price has outperformed the Index, and Barclays over the past month, three months, six months, one year, 5 years, and 10 years. That’s 6-0 in blokey Football scores. Indeed over 10 years – MITIE is up 300%. When it comes to their share price over the same period, Barclay’s men had, well, a failure to launch; they just couldn’t excite the market to give them a rise (albeit the CEO got pay rises) – simply couldn’t get it up – the bankers were as limp as a wet lettuce.
I’m not saying it’s sensible to base an investment strategy on this, or that you should put all your money in MITIE – but for all those bankers who bang on about how they need to be paid lots because they are so talented, I would say this, research in my book shows that women tend to be less vocal in asking for higher pay, or indeed placing a greater value on their work. So maybe the problem is, as exhibited by the male-dominated world of banking, men not only value their work more, and so get paid more, but actually, clearly, over-value their work.
It would be a leap to say banks need more women at the top – but if my little experiment is anything to go by, it couldn’t get worse could it? Oh, by the way, most fund managers, those who can’t beat the Index, are men too.