Section 1.1: Understanding LinkedIn's Selection Criteria

Before I could predict the performance of these companies, I needed to understand how LinkedIn's team determines who qualifies for their list. Fortunately, most sites that compile such rankings provide a link detailing their evaluation process.

Laura Lorenzetti, a senior managing editor at LinkedIn, authored an insightful article that outlines not only their ranking methodology but also the rationale behind it. Initially, LinkedIn's list aimed to highlight businesses that professionals were most eager to join. However, this approach overlooked how effectively a company prepares its workforce for lengthy careers.

Consequently, Lorenzetti's team shifted their focus to recognize companies that excel at fostering long, fulfilling, and prosperous careers for their employees. While this new goal seems reasonable, it is important to note that individuals have differing views on what constitutes a fulfilling career. Therefore, to create a ranking based on this criterion, the team had to:

1. Break down the concept of a "good" career into universal elements applicable to most workers.
2. Convert these elements into quantifiable metrics that could be correlated with LinkedIn's proprietary data.

Lorenzetti details the extensive hours spent collaborating with data scientists and esteemed professors from top business schools, such as Wharton, to establish a list of benchmarks that reflect how effectively these companies support their employees' career development. Below are the key pillars they identified.

Section 1.2: Evaluating Performance Against the S&P 500

It’s noteworthy that LinkedIn's rankings aren’t intended to serve as a benchmark for stock market returns, as not all companies on the list are publicly traded. Notable firms like EY, KPMG, and PwC, for example, are absent from the rankings. Nevertheless, 82% (41 out of 50) of the top companies from 2021 were publicly traded, providing a substantial sample for analysis.

To mitigate market volatility while including companies that may have gone public recently, I decided to use a three-year look-back period.

Without further delay, here are the findings: if you had invested in a single share of each publicly traded company on LinkedIn's 2021 top companies list three years ago, you would have seen a return on investment of 75.25%. This figure is a full 10 percentage points higher than the S&P 500's performance during the same timeframe! As anticipated, major tech companies like Apple and Alphabet, the parent company of Google, significantly contributed to this number. Surprisingly, retail and automotive firms like Home Depot and Ford also performed admirably, boasting returns of 101.2% and 124.3%, respectively.

This analysis is not exhaustive, as many factors remain unaccounted for. Notably, a considerable portion of LinkedIn's Top 50 companies also belong to the S&P 500. Nonetheless, it’s fascinating to consider how principles centered around employee career advancement and workplace diversity might correlate with elevated valuations in comparison to the broader market.

Moreover, it’s encouraging to observe that despite the prevalent narrative dominated by tech giants like Tesla and Google regarding market performance, the companies on this list encompass 25 distinct sectors. This suggests that investing in this diverse array of stocks could yield a well-rounded portfolio covering nearly all market segments.