When Barron's published its latest 500 ranking on the weekend, it warned that the list of the top financial performers in the United States and Canada wasn't exactly a boon to short-term investors: "While such operating success might not generate immediate returns for shareholders, it suggests management is on its game...." the story read.
Good thing the story came with that caveat, because according to Bespoke Investment Group the top names on the list tend to lag. Or, at least they did last year.
The list ranks companies based on their revenue growth over the past year (excluding money earned through divestitures), plus uses a metric to calculate return on investment over the past year and three years. The result: a list of superior financial performance.
However, Bespoke looked at last year's top 10 - which included Gilead Sciences , Biogen IDEC , Research In Motion Ltd. , and MasterCard Inc. - and found that a portfolio of equal weighted holdings has underperformed the broad S&P 500 by 1.5 percentage points over the past 12 months.
"The question for investors reading this article is, do the most highly regarded companies always do the best? The answer to this question is an emphatic no," Bespoke said on its blog. "In the long run high quality tends to win out, but in the short run anything can happen."
Curiously, the only name from last year's list that survived to this year is RIM, whose shares have slumped 30 per cent over the past year.