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A Unique Geographic Position Makes Allete An Attractive Utility

Summary Midwest utility holding company ALLETE has encountered substantial share price volatility in 2015 so far due to broader utilities volatility and its own diversification efforts. Concerns about the company’s exposure to coal mining and coal-fired electricity have risen in recent months as the federal government has proposed to crack down on power plants’ carbon emissions. In the short term, ALLETE is insulated from commodities volatility since its major electricity customers supply the strengthening U.S. auto manufacturing sector. In the long term, the company is positioned to translate carbon restrictions into rate base growth and new projects for its clean energy development subsidiary. The company’s share valuation and dividend yield are already attractive. Given its recent volatility, however, potential investors will likely be able to get rock-bottom valuations by waiting a bit longer. Midwest utility holding company ALLETE, Inc. (NYSE: ALE ) has experienced an abnormally high amount of share price volatility in 2015 to date. The company’s share price set a new all-time high early in the year before shedding 24% of its value in seesaw action that has persisted until now. While some of this volatility can be attributed to the uncertainty that has impacted the broader utilities sector regarding future interest rate movements, ALLETE’s heavy exposure to coal and coal-fired electric generation assets has caused investors to turn bearish given the current federal U.S. regulatory environment. Furthermore, the company differs from most of its peers in that its primary customer base consists of a handful of large industrial facilities rather than a large number of small, residential homes. This article evaluates ALLETE as a potential long investment opportunity in light of these factors. ALLETE at a glance Headquartered in Duluth, Minnesota, ALLETE Inc. is a utility holding company that comprises six wholly-owned subsidiaries in addition to an 8% stake worth $115 million in the broader regulated venture American Transmission Co. Minnesota Power is the most important of these subsidiaries and, as a regulated electric utility, it provides electricity to 144,000 residential customers, 16 municipalities, and several large industrial customers in northern Minnesota. It generates sufficient electricity to meet the demand of its 26,000 service area via multiple sources, the largest of which (62% of the total) is coal. Another 29% is derived from power purchase agreements, of which a large fraction is also generated from coal, and hydro. In all Minnesota Power has a total generating capacity of 1723 MW. Minnesota Power operates within a relatively favorable regulatory scheme that includes a 10.4% allowed return on equity, cost and fuel price riders, and a $2.6 billion rate base. More than 50% of its electric sales are attributable to industrial customers, including five large producers of taconite, an important iron-bearing rock that is an important raw material input in the steel industry. The industry in the company’s service area has remained buoyant of late and the company expects new industrial customers to increase demand by up to 600 MW. Furthermore, the state of Minnesota borders states that have some of the most abundant wind resources in the country, and the subsidiary expects to meet at least some of this demand via investments in new wind capacity in North Dakota. Minnesota Power expects to average roughly $250 million in annual capex through 2018 in part to meet this demand growth, providing support for future rate base increases. ALLETE’s non-regulated subsidiary BNI Coal, which operates closely with Minnesota Power, owns and operates a lignite mine in North Dakota. This mine yields roughly 4 million tons of coal annually that is sold to electric coops in the area that in turn have power purchase agreements with Minnesota Power. Under ordinary circumstances, it would appear to be optimally placed, thanks in large part to the fact that its “cost plus” contracts run through 2037, to benefit from growing demand for electricity (and thus generation fuel) in Minnesota Power’s service area. This would be true if its name was “BNI Gas” instead of “BNI Coal.” Given coal’s rapid fall from grace in the eyes of federal regulators, however, the subsidiary runs the risk of becoming a burden on ALLETE’s balance sheet over the next several years. To the company’s credit, ALLETE responded to the unpopularity of fossil fuels in general and coal in particular by forming ALLETE Clean Energy in 2011. This non-regulated subsidiary is responsible for the development and acquisition of wind, hydro, solar, biomass, and shale gas (hence its use of the word “clean” rather than “renewable” in its name) projects. Recognizing the existence of a broad resource nexus between energy and water, ALLETE also acquired U.S. Water Services, which is a small water management firm based in Minnesota, in February 2015. Finally, ALLETE owns a number of smaller subsidiaries that operate in different sectors. Superior Water, Light, & Power is a regulated electric, water, and natural gas utility that operates within a service area consisting of Superior, Wisconsin and the immediate vicinity. This subsidiary utility has an attractive allowed return on equity of 10.9%, although both its rate and customer bases are only a fraction of those of Minnesota Power, making it a small contributor to ALLETE’s consolidated earnings. ALLETE Properties is a subsidiary that owns three property developments in Florida. The incongruous nature of its operations and generation of losses of late have prompted its parent company to investigate gradual sales of the subsidiary’s assets that will allow it to exit the property sector while maximizing returns. ALLETE is also a participant in the CapX2020 initiative, which is focused on the upgrading of transmission lines. ALLETE’s consolidated operations are ultimately strongly influenced by the regulated utilities sector. Its regulated utilities operations were responsible for 88% of its consolidated revenue in FY 2014. Furthermore, with the exception of ALLETE Properties, its non-regulated subsidiaries operate closely within the regulated utilities sector, complementing ALLETE’s consolidated revenues and earnings. This has allowed the parent company to report a respectable EPS CAGR of 6.7% CAGR since 2010. Its dividend has increased by 15% over the same period even as its payout ratio has declined from 76% to 65%. Nor is ALLETE exposed entirely to Minnesota, as its regulated operations now encompass North Dakota, South Dakota, and Wisconsin as well while its clean energy operations reach as far afield as Oregon (hydro) and Pennsylvania (shale). Q2 earnings ALLETE reported Q2 consolidated revenue of $232.3 million (see table), up by 24% YoY and beating the consensus analyst estimate by $20.3 million. The increase and beat were mostly attributable to the inclusion of full quarter results from US Water Services and Clean Energy for the first time. The revenue number was also aided by the presence of a cost recovery rider and the commencement of a new power sales agreement in June 2014. The company’s retail numbers came in low, with retail electric sales in terms of kWh sold falling by 9.7% YoY, although the consolidated sales number increased by 7.2% over the same period due to power purchase agreements. The average price of regulated electricity increased by 7% compared to the previous year, offsetting the negative impact of lower retail sales volume on revenue. The presence of a fuel cost rider kept regulated revenue from increasing, however. ALLETE financials (non-adjusted) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Revenue ($MM) 323.3 320.0 290.7 288.9 260.7 Gross income ($MM) 179.6 187.9 203.3 200.0 177.1 Net income ($MM) 22.5 39.9 32.9 41.6 16.8 Diluted EPS ($) 0.46 0.85 0.72 0.97 0.40 EBITDA ($MM) 87.3 100.6 95.0 101.7 69.1 Source: Morningstar (2015). ALLETE’s cost of revenue increased by 72% YoY to $143.7 million due to the aforementioned subsidiary additions. Gross income remained relatively flat at $179.6 million YoY due to this increase despite the much stronger revenue result. Net income came in at $22.5 million, up by 33% from the previous year. Diluted EPS came in at $0.46 versus $0.40 YoY, missing the consensus estimate by $0.02. The EPS included acquisition fees of $0.02, without which the consensus estimate would have been matched, as well as dilution equal to $0.07. EBITDA increased from $69.1 million to $87.3 million YoY. Finally, ALLETE’s dividend in Q2 represented a 3.1% increase over the previous year. Outlook ALLETE’s management announced during the Q2 earnings call that it was increasing its FY 2015 guidance up to $3.20-$3.40 despite the Q2 earnings miss to account for proceeds from the sale of a wind farm that its subsidiary ALLETE Clean Energy is constructing. This result would represent its strongest annual earnings in more than a decade while also continuing a multi-year trend. The company’s current year earnings are due in no small part to the resilience of Minnesota’s taconite producers in the midst of a very bearish global steel market. While falling demand for industrial materials in the developing world in general and China in particular has pummeled steel indices (steel ETF prices are hovering around their early 2009 lows), Minnesota’s taconite producers mainly supply domestic steel producers that in turn supply U.S. automakers. ALLETE’s management has reported few signs of weakness among its large industrial customers as a result, with only one customer idling its facility. ALLETE’s earnings are highly sensitive to electricity demand from taconite producers, with a 1 million ton per year change to taconite production having an impact of $0.03/share on the company’s diluted EPS. In fact, ALLETE’s heavy exposure to Minnesota’s taconite production could continue to be a boon in coming quarters. Petroleum prices fell sharply in Q4 2014 and Q1 2015 and, while they have rebounded a bit from their 2015 lows, they remain well below their earlier highs. Consumers have responded by buying new, less fuel-efficient vehicles, driving demand. This month’s auto sales are expected to be the highest for October since 2001, while 2015’s numbers are expected to be 5% higher than 2014’s. Cheap petroleum should therefore support ALLETE’s earnings via Minnesota Power by keeping taconite demand high. While I do expect crude prices to rebound, especially as the finances of OPEC members are squeezed ever tighter, it will take several quarters for any reduced demand for U.S. steel to be felt by ALLETE. In the longer term, ALLETE’s earnings have the potential to be substantially impacted by the Clean Power Plan that was recently unveiled by the U.S. Environmental Protection Agency [EPA]. This new regulation requires each U.S. state to achieve predetermined reductions to the carbon intensity (greenhouse gas emissions per kWh of electricity generated) of their respective power plant sectors. Minnesota must achieve a large 24.5% reduction by 2024, while Iowa and South Dakota must achieve still larger reductions. While the EPA’s plan will not benefit all utilities, ALLETE is uniquely positioned due to the abundant wind resources near its service area and its new ALLETE Clean Energy subsidiary, the latter of which is already developing a reputation as a wind farm construction firm. ALLETE itself will need to shift away from coal towards renewables and, if this move is done properly (i.e., by building its own capacity rather than relying on power purchase agreements), it could support future capex. Beyond that, however, ALLETE Clean Energy should become a steadily larger contributor to consolidated earnings as utilities in the surrounding area also rely upon it to develop new renewables capacity. BNI Coal will suffer from weakening coal demand under this scenario, of course, and ALLETE itself could incur asset write-downs if it is required to send some of its coal-fired generation capacity into early retirement, but on balance, I expect the company to benefit under the Clean Power Plan. Valuation The analyst consensus estimate for ALLETE’s FY 2015 EPS has increased over the last 90 days in response to the resilience of its industrial customers and recent asset sale while the FY 2016 EPS estimate has remained relatively flat. The FY 2015 estimate has increased from $3.11 to $3.26 while the FY 2016 estimate has been revised slightly lower from $3.39 to $3.37. Based on a share price at the time of writing of $50.36, the company’s shares are trading at a trailing P/E ratio of 16.3x and forward ratios of 15.4x and 14.9x for FY 2015 and FY 2016, respectively. While the trailing ratio is in the middle of its historical range, both of the forward ratios are near the bottom of their respective 5-year ranges, having actually been at the bottom as recently as last month. Conclusion ALLETE’s share price has been all over the place in 2015 to date in response to the combination of a bearish sentiment in the broader utilities sector and its own diversification efforts. This latter move is the one that investors will want to pay the most attention to since it has the potential to provide the company with the type of growth options that are not available to most of its peers. The company’s heavy exposure to coal mining and coal-fired generation is a concern at a time when both activities are attracting the ire of regulators. This disadvantage is more than offset by the company’s twin advantages of close access to abundant wind energy resources and a subsidiary that contributes to consolidated earnings by developing and selling wind farms. Meanwhile, the EPA’s Clean Power Plan will support the company’s future rate bases while driving demand for ALLETE Clean Energy’s services. ALLETE is an attractive long investment opportunity at present due to its 4% forward yield and relatively low valuation. Given the volatility that has characterized utilities in recent months, however, I would encourage potential investors to wait for the company’s share price to provide an additional margin of safety by trading at 14x FY 2016 earnings, or $47.18 based on the estimate available at the time of writing, before initiating a new position. Initiating a short put position could be an attractive strategy here at this time.

OGE Energy Is A Unique Opportunity For Energy Bulls

Summary Oklahoma utility holding company OGE Energy’s shares have underperformed its peers by a wide margin YTD, as investor sentiment has turned negative due to its exposure to oilfields. The company’s unique status, as both a regulated utility and a stakeholder in an MLP, has allowed it to finance rapid dividend growth via distributions. The company will struggle to meet its future dividend targets, if sustained low energy prices cause the MLP distribution growth to cease and Oklahoma’s economy to stagnate. The company’s share valuations have fallen sharply, however, and do not reflect the benefits provided by its unique position. While a sufficient margin of safety is not available for conservative investors, aggressive investors, who expect energy prices to remain above their earlier lows, should consider it as an investment. Investors in Oklahoma utility holding company OGE Energy (NYSE: OGE ) have seen their holdings underperform the broader Dow Jones Utility Average by a significant margin in 2015 YTD, as the company’s shares have declined by 25%. Worse, unlike many of its peers, it has been beset by slow growth over the last five years, having achieved an EBITDA increase of a mere 1% over the entire period. More recently, the market has expressed skepticism over the company’s ability to achieve its ambitious dividend goals, given its direct and indirect exposure to the financial health of domestic oilfields. This article evaluates OGE Energy as a potential long-term investment in light of these conditions. OGE Energy at a glance Headquartered in Oklahoma City, OGE Energy is comprised of two segments. The primary segment is Oklahoma Gas & Electric (OG&E), which is a regulated electric utility generating, transmitting, and distributing electricity to 819,000 customers, primarily residential and commercial, in central Oklahoma and a small part of western Arkansas (Arkansas only contributes to 7% of the company’s rate base, with Oklahoma contributing the rest). OG&E owns and operates 6,800 MW of electric generating capacity and enough transmission and distribution lines to supply a service area, including Oklahoma City and the surrounding area, covering 30,000 square miles. OG&E’s generating capacity consists of 54% coal, 35% natural gas, and 11% wind power. While it recently began operating a pilot 2.5 MW solar PV installation, by 2020 it expects its fuel mix to be 50% coal, 37% natural gas, and 13% wind. OG&E operates within a moderately favorable regulatory scheme that includes a 11.1% allowed return on equity and a 56% equity ratio. This combination has supported rapid and accelerating dividend growth by its parent OGE Energy since FY 2011, most recently in the form of a 11% YoY increase, and the company is targeting a 10% annual growth rate through FY 2019. The high allowed return on equity has also led to above-average debt ratings for OG&E of ‘A1’ from Moody’s and ‘A-‘ from Fitch. In addition to OG&E, OGE Energy also owns a 26.3% limited partner stake and 50% general partner stake in MLP, Enable Midstream Partners LP (NYSE: ENBL ). With $11 billion in assets, Enable gathers and processes natural gas from a number of South Central gas fields, including within Oklahoma, that it then pipes to destinations both within the region and outside of it. Distributions from Enable in recent quarters have equaled only 16% of OGE Energy’s total cash flows, or 20% of OG&E’s cash flows, although the parent company’s management expects them to increase by 6% to 8% annually. Q2 earnings report OGE Energy reported Q2 revenue of $549.9 million (see table), down 10.1% YoY and missing the analyst consensus estimate by $68 million. The decline and miss were the result of the utility’s electric sales volume falling by 5.3% YoY, partially offset by a 1.1% increase to customer numbers over the same period. The reduced demand was in turn due to the prevalence of cool temperatures in May and June that allowed the company’s customers to avoid using their air conditioners, with the average number of cooling degree-days over the quarter coming in 10.7% below the previous year’s average and 2.4% below the long-term average. OGE Energy financials (non-adjusted) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Revenue ($MM) 549.9 480.1 526.2 754.7 611.8 Gross income ($MM) 339.0 268.5 289.2 449.4 340.9 Net income ($MM) 87.5 43.2 58.4 187.3 100.8 Diluted EPS ($) 0.44 0.22 0.29 0.94 0.50 EBITDA ($MM) 237.5 170.2 202.4 367.6 251.7 Source: Morningstar (2015). OGE Energy’s gross margin declined slightly YoY from $340.9 million to $339 million, as its cost of revenue declined by 22% over the same period due to falling energy prices, almost offsetting the negative impact of reduced electricity demand on earnings. OG&E’s utility operating income fell to $127.2 million from $141.8 million over the same period, however, while income from distributions fell to $28.2 million from $39.3 million. The former was the result of the utility segment’s O&M and depreciation costs increasing compared to the same quarter of the previous year, driving a 6.4% increase to OGE Energy’s operating expenses. While management didn’t attribute this increase to regulatory lag in its Q2 earnings call , it did state that it was the result of the previous year’s capex, suggesting that rates have not kept pace. The company’s net income declined to $87.5 million from $100.8 million YoY, resulting in a diluted EPS result of $0.44 versus $0.50 in the previous year. The EPS result was in line with the consensus analyst estimate, despite the substantial revenue miss. The utility segment contributed $0.34 to the EPS result, down from $0.38 YoY, while the company also reported distributions from its stakes in Enable of $0.12, down from $0.10. EBITDA also fell from $251.7 million from $237.5 million over the same period. The company’s board opted to increase its dividend by 11% despite the overall decline to net income, exceeding its target and providing investors with a pleasant surprise in the process. Outlook Management reiterated in its Q2 earnings call that its previous forecast for OG&E to generate diluted EPS of $1.41-$1.49 and Enable to provide distributions to OGE Energy equal to an additional $0.35-$0.40 in FY 2015. An important assumption behind this forecast is that the company’s service area experiences normal weather in Q3 and Q4. Q3 temperatures were close to the average, with warmer numbers in early August and September being offset by cooler numbers in the latter parts of both months. Q4 is currently on track to be close to normal in terms of temperatures. Oklahoma is one of the few U.S. states that is not expected to experience large temperature variations resulting from the strong El Nino that has been developing over the last several months. Historical data indicates that OGE Energy’s service area experienced only slightly warmer-than-normal temperatures between October and February and slightly cooler-than-normal temperatures between April and June during previous El Nino events . This could result in higher electricity demand in Q4 (electricity demand tends to increase along with the number of heating degree-days, although not by nearly as much as natural gas demand does) and lower demand in Q2 2016, although any impacts are likely to be too small to have much of an impact on earnings. Of much greater concern is OGE Energy’s exposure to Oklahoma’s economy. The state has benefited strongly from the expansion of domestic crude and natural gas production that has developed in the region over the last five years, so much so that Forbes recently placed Oklahoma at #7 on its Best Places For Business list while CNNMoney named it #9 on its Fastest Growing Cities list. Between 2010 and 2015 Oklahoma’s unemployment rate was substantially lower than that of the U.S. while its GDP growth rate was higher. While the state’s economy has remained strong to date, its unemployment rate has begun to climb as sustained low energy prices have caused the finances of many oilfield firms to deteriorate . OGE Energy is exposed to sustained low energy prices in two ways. First, Enable’s share price has fallen by 34% YTD, as the value of many of its assets have declined, pushing its forward yield to nearly 10%. A further share price decline could cause the MLP to reduce its yield, in which case its distributions to OGE Energy will decline in absolute terms. While OGE Energy’s management has stated that it does not expect this to occur, a sentiment supported by its recent dividend increase, the company does intend to use its Enable distributions to finance both its planned dividend growth rate of 10% over the next five years as well as much of its capex, with the former resulting in an attractive dividend payout ratio of 55% by 2019. Capex in turn is expected to peak in FY 2016 at $720 million, mostly due to modernization and environmental investments, before declining to $445 million in FY 2019. Reduced distributions from Enable would not prevent this capex from occurring but it would increase the likelihood that OGE Energy would raise the capital in the form of additional debt, exposing itself to the Federal Reserve’s upcoming interest rate increase. OGE Energy is also exposed to sustained low energy prices via OG&E. 12% of the utility’s sales volume came from oilfield customers, a number that remained steady in the first half of 2015 despite declining demand overall. Crude and natural gas prices fell again in Q3, however, causing domestic production to also decline, and this weakness could show up on OGE Energy’s earnings statements later this year in the form of reduced electricity consumption by oilfield customers. Potential investors will want to keep a close eye on the company’s Q3 earnings report release next month for any such signs. Furthermore, slowing domestic fuel production will eventually cause Oklahoma’s population growth to decline if oilfield jobs growth slows or even stops. Such population growth in the first half of 2015 helped to mitigate the negative impact of mild weather in the service area on OGE Energy’s earnings, but such a buffer is by no means assured of existing in the future if energy prices remain low. While the precarious state of U.S. oilfield suggests that potential investors in OGE Energy should exhibit some caution, it is worth noting that the company is also competitively placed compared to many of its peers in other areas. In the short-term is its above-average credit rating strength. Even in the event that the company is forced to turn to debt to finance its planned capex just as interest rates are increasing, the fact that OG&E’s credit ratings are superior to those of its peers will enable it to take advantage of the widening spread that has already opened up in the corporate bond market. The impact of higher rates on its interest costs will be mitigated so long as it maintains its strong credit ratings. In the long-term OGE Energy is also better-positioned than many of its peers to weather upcoming federal rules on power plant carbon intensity (lbs of CO2 per MWh generated). The U.S. Environmental Protection Agency’s Clean Power Plan requires each state to develop its own mechanisms for reducing their average carbon intensity by a predetermined amount. Oklahoma, for example, is required to achieve a 21% reduction by 2024 and a 32% reduction by 2030. OGE Energy has already begun to reduce OG&E’s carbon intensity in order to meet other environmental regulations and changing market conditions, however, and expects to achieve a 30% reduction by 2020 regardless of the Clean Power Plan’s implementation. Cheap natural gas will only provide the company’s existing plans to convert coal-fired units to gas with additional impetus. Valuation The consensus analyst estimates for OGE Energy’s diluted EPS results in FY 2015 and FY 2016 have declined slightly over the last 90 days, as weak energy prices have increased the likelihood that Enable’s distribution growth slows in the future. The FY 2015 estimate has declined from $1.87 to $1.86, while the FY 2016 has fallen from $2.02 to $2.00. Based on a share price at the time of writing of $28.52, the company’s shares are trading at a trailing P/E ratio of 15.2x and forward ratios of 15.3x and 14.3x for FY 2015 and FY 2016, respectively. All three ratios are much lower than they were at the beginning of the year and are roughly in the middle of their respective historical ranges. Conclusion OGE Energy shares have performed poorly in FY 2015 YTD as the market has responded negatively to its exposure, both direct and indirect, to inland domestic oilfield production. Sustained low energy prices threaten to reduce both electricity demand from its oilfield customers and the distributions that the company earns via its positions in Enable. An especially lengthy period of low energy prices could hamper both economic and population growth in Oklahoma, depriving OGE Energy’s utility operations of expected demand growth in its service area as well. While the current investor sentiment around the company is bearish, it also presents a unique opportunity for those potential investors with a higher risk threshold. OGE Energy’s management has committed the company to a high dividend growth rate that it expects to be supported by distributions from Enable. Furthermore, management also anticipates using the distributions to help finance its planned capex over the next several years, mitigating the potential negative impacts of higher interest rates on its earnings. A rebound in energy prices from their current levels would provide investors in OGE Energy with both market-beating dividend growth and appreciating share values, the latter in particular being a rarity in the current utilities sector following several years of outsized returns. While the company’s shares currently appear to be fairly valued on the basis of their historical valuations, the prospect of future earnings growth and limited downside from higher interest rates makes OGE Energy a compelling investment for those investors who don’t expect energy prices to return to their previous lows for a sustained period.

The Best Companies To Work For Provide The Best Returns

Summary I use employee review site Glassdoor to find the best companies to work for in America. Companies with high employee satisfaction seem to provide less volatile returns. The best company to work for in 2015 was Google. Do you work for a great company? Does it take care of your needs? Does it have a happy workforce overall? If so, are you tempted to invest in its share program? Maybe you should. In this article, I look at some of the best and worst-rated companies in America in order to see which companies give the best investment returns. Introduction When it comes to analyzing stocks, many investors focus on traditional measures of valuation such as company finances, financial ratios , or earnings projections. But one problem with this is that all investors are looking at the same things. I believe that there is sense in looking at some other, more qualitative, factors too. After all, there is more to a company that just a set of numbers on a piece of paper. Companies are made up of individual people and as English philosopher Alain De Botton said: To write up the goings-on in businesses only in economic terms, to sum up an entire company as being +1.20 or to compress the experiences of 8,000 people into a turnover of 375,776 seems as limited as reducing a novel of the complexity of Price and Prejudice to a ledger of the characters’ bank accounts. – The News, Alain De Botton . Knowing this, I believe it is important to not only analyze the financials of a business but also the manner in which the company treats its employees. And in my view , a company that treats its employees well is likely to perform more reliably and make better returns for investors. To analyze this concept, I decided to gather data from the employee review site Glassdoor . If you haven’t heard of Glassdoor, it’s basically a site that allows employees to leave anonymous reviews of employers. By storing up this data, Glassdoor has been able to rate companies across the globe based on levels of employee satisfaction. I therefore took the best and worst companies (as rated on Glassdoor) and analyzed which companies had performed the best over the subsequent few years. Best Companies To Work For In 2012 In 2012, Glassdoor released a list of the best 50 companies to work for in America and gave top place to Bain & Company. The highest publicly listed company was Facebook (NASDAQ: FB ), which was praised for its “attractive salary and friendly employees.” The following table shows 2012’s best 11 companies to work for in America and the subsequent share price of those companies, beginning 8/11/2012: (Note, I only included companies on the list that were publicly listed on one of the major US exchanges). As the table indicates, the best publicly listed company in 2012 according to Glassdoor ratings was Facebook. The stock went on to give a 77% one-year return and a 240% three-year return. Investing $1000 into each of the 11 best-rated companies would have made a 20.28% return on investment over one year and a 61.62% return over three years. Worst Companies To Work For In 2012 Turning now to the companies that were rated worst. This data was gathered from 24/7 Wall Street , originally from Glassdoor. The table below shows the worst rated 11 companies and their subsequent share performance: As shown in the table, the worst company to work for in America was Dish Networks (NASDAQ: DISH ). However, investing in DISH would have produced an excellent one-year return of 47.57% and a 3-year return of over 100%. Moreover, investing $1000 into each of the worst-rated companies would have returned 67.46% over one year and 110% over three years, sharply outperforming the return for the best-rated companies. RadioShack (NYSE: RSH ) It’s also worth noting though, that one company on this list (RadioShack) would have been a very bad choice for your portfolio. Users on Glassdoor criticized RadioShack for its “poor management, below average pay, and strenuous hours.” And if you’d invested in RadioShack alone, you would have lost 81% of your capital. In fact, the company was later forced into liquidation in February 2015. Best Companies To Work For In 2013 In 2013, the highest rated public company on Glassdoor was Facebook again. And following is the top 9 companies to work for in 2013 and their subsequent share performance from 7/20/2013: As is clear, investing in the best-rated companies would have been a good strategy in 2013. The top rated company, Facebook, produced a 166% return over the first year and a 276% return over two years. Investing $1000 into each stock would have returned 29.84% in the first year and 49.73% over two years. Worst Companies To Work For In 2013 In 2013, there were some new entries into the worst-rated companies to work for in America including businesses such as NCR Corp. (NYSE: NCR ) and Dollar General (NYSE: DG ). As you can see from the following table, the worst 9 companies to work at in 2013 produced poor returns over the next one and two-year time horizon: Investing $1000 into each of the worst-rated companies in August 2013 would have produced just a 0.75% return on investment in the first year and a 6.84% return over two years. (click to enlarge) So what can we make of these results? The goal of this piece was to try and find a link between employee satisfaction and share price performance, and on first glance, our findings are not completely compelling. In 2012, the worst places to work actually turned out to be the best stocks to invest in. This suggests that a contrarian type strategy, where investors look for businesses on the verge of turnaround could be worthwhile. However, this finding was reversed in 2013 where the worst-rated companies significantly underperformed. Less volatility One interesting insight to be culled from this study is the case of RadioShack. The stock ended up in bankruptcy in 2015 with its stock price going to zero. And the inclusion of the company in the worst-rated list in both 2012 and 2013 is telling. So, using this data on its own might not be particularly wise. But it does seem likely, that the best companies to work for give less volatile, more reliable, stock returns overall. In general, companies should be evaluated not just on their finances but based on the individuals that make up the business as a whole. Personally, I would rather invest in those companies with the most content employees. – As of 2015, the best company to work for in America was Google ( GOOG ). – Dates chosen to reflect release of the worst companies list in order to avoid look-ahead bias – Number of companies used chosen in accordance with the number available on the worst companies list. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.