Meir Statman : Investing in Admired Companies : Morningstar
Meir Statman, the Glenn Klimek Professor of Finance, had his study on investing in admired and despised companies referenced in an article analyzing the same subject; the piece focused largely on Apple’s recent ranking atop Fortune’s most admired companies list. The article suggested that investors consider selling their Apple stocks, as highly respected companies have historically struggled to live up to such lofty expectations.
An excerpt from the article:
Consider a study conducted several years ago by two finance professors: Deniz Anginer at Virginia Tech and Meir Statman at Santa Clara University. The researchers constructed two portfolios out of the stocks on Fortune's annual list. The first contained the stocks of companies that were most admired companies, while the second contained those with the lowest Fortune scores -- those most despised, in other words.
Between April 1983 and December 2007, the Despised Company portfolio outperformed the Admired Portfolio by nearly two percentage points per year, on average. Perhaps even more revealing, the professors found that increases in admiration were, on average, followed by lower returns.