Tim Jones, formerly of Shell Ventures has written a book called Growth Champions in which he explores the question, ‘Do the share prices of innovative companies out-perform the market?’ His answer is a resounding yes as explained in this article from the ISPIM magazine.
‘The Innovation Leaders analysis has been monitoring analysis of the most effective innovators across 25 sectors for the last decade. Initial assessments showed that, as a group of companies, average growth in share prices since 2002 was over 15% per annum. This compares very favorably to average annual returns for the FTSE 100, NASDAQ and S&P500 indexes that, respectively, saw average growth over the same period of 2%, 6% and 3%. This presents a significant opportunity not only for supporting the internal business case of innovation professionals within their organizations but also for the global investment community – from individual investors to multi-billion dollar hedge funds.’
It makes sense that the companies which are fastest and best at introducing new products and services should show faster growth, improved profits and better share price performance. The big problem is spotting them in advance. If we can do that then our portfolios will soar. Which are your favourite innovative companies? Don’t just buy their products, buy their shares.