A ranking of future-oriented companies
Every successful business starts with an act of imagination. But the most innovative companies are those that constantly reimagine their potential, even if it means radical changes in strategy. This constant focus on the future usually pays off handsomely for investors. Three years ago, Fortune partnered with management consulting firm BCG to create the Future 50, using a proprietary system that analyzes dozens of factors to identify the companies with the best long-term growth potential.
The 50 companies on last year's list (2020) have produced a cumulative shareholder return of 46.40% since publication, compared with 19.70% for the S&P 500 over the same period.
Sources: S&P Global and BCP Henderson Institute
Let's look at this year's ranking, which was released in February 2021:
Source: Boston Consulting Group
The full ranking is available here: https://fortune.com/future-50/
Why did these companies thrive during the pandemic and could continue to grow even faster once the pandemic is over?
After more than a year of the pandemic, one thing is clear. The competitive landscape has been significantly reshaped. Yesterday's leaders are not necessarily today's leaders. New winners have emerged. The crisis of covid-19 has created a breeding ground for new needs and accelerated other existing needs. The companies selected in this index have done particularly well during the crisis by demonstrating vitality and continuous reinvention.
The Fortune Future 50 Index is based on two pillars: a "top-down" assessment based on the potential of the identified markets and a "bottom-up" assessment based on the ability of companies to generate growth.
By taking a closer look at these companies, we can see what it takes to thrive. Companies can gain (or lose) their advantages at three different stages: They can be severely affected by the impact of the crisis (at the beginning and during the crisis), recover more quickly (after the crisis), or even use the crisis to increase their advantages. During the first wave of the pandemic, when executives were focused on minimizing the immediate impact, these sustainable growth companies only slightly outperformed their peers. However, as the crisis dragged on, as the lockdowns continued, the focus shifted to the second and third phases, during which the Fortune Future 50 companies performed significantly better.
What does this index consist of?
We note that of the 50 stocks, 50% are in the technology and communications sector, which were less affected than other sectors. Trends that were already visible have accelerated, such as e-commerce. Health services are also in pole position and represent 22% of the ranking in 2020 (compared to 12% in 2019). Consumers are all the more health-conscious in this period.
Geographically this time, companies are mostly American and Chinese (80% of the ranking), two economies that are back on the growth track in 2021.
Sources: S&P Global and BCP Henderson Institute
During the recovery phase, one of the key challenges has been the need to respond and adapt to the stresses of the pandemic. Perhaps as a result of these capabilities, Future 50 companies returned to pre-shock levels in four months, while the MSCI World Index took over six months.
For this first example, let's take Square, which is in 9th place in the 2020 and 2021 rankings. This digital payments provider suffered a dramatic drop in payment volume when the pandemic began. When foot traffic at small merchants (Square's cash cow), disappeared overnight. The company lost more than half of its market value in three weeks. However, Square had launched a home pickup and delivery service just before the downturn, and accelerated its online store offering to the point where new weekly listings began to outpace the supply of service points at merchants.
Among the top 10, ServiceNow is right up there in 2020. This B2B software company has resisted the crisis perfectly. ServiceNow specializes in cloud computing services and offers its customers applications for IT operations (digital workflows, intelligent chatbot, machine learning, etc.). ServiceNow has turned to models that focus on efficient operational spending for its customers. It offers a unique adaptation of the working environment to the needs of the customers (customized SaaS). ServiceNow has also accelerated investments in its data center infrastructure network to meet growing demand.
In second place in this ranking, we find Veeva Systems, a provider of cloud software solutions for the healthcare industry in particular (multi-channel customer relationship management, regulated content and information management, master data and customer data management, etc.). Veeva Systems understands the challenge for its customers to move from a siloed data system to a unified information management platform that is compatible with current business processes.
Stock market performance of the three stocks mentioned :
A study of market history reveals that crises, pandemics and wars reshuffle the deck and lead to new growth opportunities for companies able to adapt to the new norm. Adaptation and reinvention will remain at the heart of creating a sustainable competitive advantage (also called "moat"). Francis Scott Fitzgerald said: "Vitality shows not only in the ability to persist, but in the ability to start over". In other words, uncertainties create gaps. Behind every crisis lies an opportunity for those who know how to seize it.