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Study Finds "Quality Stocks" Yield Big Payoff
Second NIST Stock Investment Study February 1996



A second NIST stock investment study (the first was in February 1995) shows once again that quality management can result in impressive returns. NIST "invested" a hypothetical sum of money in the Standard & Poor's 500 and in each of the publicly traded companies (five whole companies and nine parent companies of subsidiaries) who have won the Malcolm Baldrige National Quality Award since 1988. The investment was tracked from the first business day in April of the year the Baldrige winners received the award or the date they began publicly trading through Aug. 1, 1995.

As a group, the 14 companies soundly outperformed the S&P 500 by greater than 4 to 1, achieving a 248.7 percent return on investment compared to 58.5 percent for the S&P 500.


The five whole company winners did even better, outperforming the S&P 500 by greater than 5 to 1 (279.8 percent to 55.7 percent). NIST also performed a similar investment study for the 41 publicly traded applicants that received Baldrige Award site visits. That group outperformed the S&P 500 by greater than 2 to 1. For a copy of the study, fax a request to (301) 926-1630. Media Contact: Jan Kosko, (301) 975-2767

Results of Baldrige Winners' Common Stock Comparison

Methodology:

A hypothetical sum is invested in each publicly-traded company's common stock on the first business day in April of the year they won the Baldrige Award (or the date when they began public trading, if it is later); $1,000 is invested in each whole company, and for subsidiaries the sum invested is $1,000 x the percent of the whole company's employee base the subunit represents; The same total dollar amount is also invested in the Standard & Poor's (S&P) 500 on the same day. Adjusting for stock splits and/or stock dividends, the value on August 1, 1995 is calculated. Information is reported two ways: all publicly-traded winners and only whole company Baldrige winners. The 14 publicly-traded winners outperformed the S&P 500 by over 4 to 1, achieving a 248.7% return compared to a 58.5% return for the S&P 500. The 5 whole company winners outperformed the S&P 500 by greater than 5 to 1, achieving a 279.8% return compared to a 55.7% return for the S&P 500. A summary of the results follows.

1988-1994 publicly-traded winners:

  $ invested Value 8/1/95 Change
Winners 6,330.61 22,062 248.7%
S&P 500 6,330.61 10,033 58.5%
       

1988-1994 publicly-traded, whole company winners:

  $ invested Value 8/1/95 Change
Whole Company Winners 5,000 18,991 279.8%
S&P 500 5,000 7,787 55.7%
       

Results of Baldrige Site Visited Applicants' Common Stock Comparison

Methodology:

A hypothetical sum is invested in each 1990-1994 publicly-traded, site visited company's common stock on the first business day in April of the year they were site visited (or the date when they began public trading, if it is later); $1,000 is invested in each whole site visited company, and for subsidiaries, the sum invested is $1,000 x the percent of the parent company's employee base the subunit represents; The same total dollar amount is invested in the S&P 500 on the same day. (Winners of the Award are among the pool of site visited applicants, but are not considered in all cases.)

Adjusting for stock splits and/or stock dividends, the value on August 1, 1995 is calculated. Information is reported four ways: all publicly-traded site visited companies, whole company site visited applicants, and each of those groups without the winning companies included. (Note: All numbers provided include multiple counting of applicants for each year they applied and were site visited).

The 41 publicly-traded site visited applicants outperformed the S&P 500 by over 2 to 1, achieving a 94.5% return compared to a 40.6% return for the S&P 500. The 10 whole company site visited companies outperformed the S&P 500 by almost 3 to 1, achieving a 106.0% return compared to a 39.2% return for the S&P 500. The site visited applicants without the winners outperformed the S&P 500 by more than 14%, achieving a 47.1% return compared to a 41.2% return for the S&P 500. The whole company site visited applicants without the winners outperformed the S&P 500 by over 6%, achieving a 41.4% return compared to a 38.8% return for the S&P 500. Names of Baldrige applicants are kept confidential. A summary of the results follows.

1990-1994 publicly-traded, site visited applicants, including winners:

$ invested Value 8/1/95 Change
1990-1994 Site Visited Applicants 14,708.03 28,606 94.5%
S&P 500 14,708.03 20,686 40.6%
       

1990-1994 publicly-traded, whole company site visited applicants, including winners:

$ invested Value 8/1/95 Change
1990-1994 Site Visited
Whole Company Applicants
10,000 20,597 106.0%
S&P 500 10,000 13,922 39.2%
       

1990-1994 publicly-traded, site visited applicants, not including winners:

$ invested Value 8/1/95 Change
1990-1994 Site Visited Applicants
w/o Winners
10,183.51 14,983 47.1%
S&P 500 10,183.51 14,382 41.2%
       

1990-1994 publicly-traded, whole company site visited applicants, not including winners:

$ invested Value 8/1/95 Change
1990-1994 Whole Company
Site Visited Applicants
w/o Winners
6,000 8,482 41.4%
S&P 500 6,000 8,330 38.8%
       

Winners Included in the Stock Study
(Those not included were not publicly held at the time of the study)

Whole Company Winners:

Motorola, Inc.
Federal Express Corporation
Solectron Corporation
Zytec Corporation
Eastman Chemical Company

Subunit Winners:
(The sum invested was $1,000 x the % of the parent company's employee base that the subunit represented at the time they applied)

Westinghouse Electric Corporation - Commercial Nuclear Fuel Division
Xerox Corporation - Business Products & Systems
Cadillac Motor Car Company (subunit of General Motors)
IBM Rochester
AT&T Transmission Systems Business Unit
Texas Instruments Incorporated - Defense Systems & Electronics Group
AT&T Universal Card Services
AT&T Consumer Communication Services
GTE Directories Corporation




Baldrige Website comments:
baldrige@nist.gov


Date created: 02/01/1997
Last updated: 11/29/2011