Strong capital markets in 2023 boosted shareholder return across companies: Report

Buoyed by strong capital markets in 2023, the average annual total shareholder return (TRS) surged across the companies, according to the Boston Consulting Group’s Value Creators database report. The median rose to 12 percent per year from 2019 through 2023 — up from 7 percent per year from 2018 through 2022, it added.

Technology and tech-related companies led the charge, as excitement over generative AI helped to fuel a rebound from 2022’s losses. Value creation was especially impressive among mega-cap companies and semiconductor manufacturers, the BCG Value Creators database report found. The software and electrical components industries also maintained their strong TSR trajectory, ranking 5th and 9th, respectively, among the 35 industries.

Within this group, tech hardware companies secured five of the top 10 spots and nine of the top 20. The prominent names were NVIDIA (the top performer) and Apple, which boasted of a $3 trillion market cap at 2023 end. Software players, such as ServiceNow and Shopify, also make the list, alongside electric-vehicle giants Tesla and BYD and retail powerhouses PDD and Mercado Libre.

The 2024 rankings highlight two other sets of industries that also achieved TSR gains substantially above the market average of 5 percent compared with last year’s rankings. 

The first group consists of traditional, asset-heavy industrial sectors like mining (ranking 2nd), building materials (3rd), machinery (4th), metals (6th), multi-business conglomerates (8th), and construction (10th).

The strong performance of building materials and construction was driven by the US market which, unlike Europe, sidestepped a recession despite high interest rates. 

The second group comprises industries that faced TSR headwinds from 2018 through 2022 but enjoyed strong recoveries in 2023. These include industries that rely on significant consumer spending like automotive (OEMs and component suppliers), consumer durables, and travel and tourism. Investors were apprehensive about such companies during the pandemic years but seems to have regained confidence based on stronger-than-expected consumer spending in 2023.

Several healthcare sectors — large-cap pharma, medical technology, and healthcare services — experienced a slowdown even though their median returns surpassed 10 percent annually. During the pandemic, some companies in these sectors saw profits surge thanks to innovative treatments. However, with a more stable healthcare landscape, investors appear to be recalibrating their expectations.

Geography-wise stand

The large number of leading firms in technology and other highly ranked industries, as well as more favourable macroeconomic conditions, allowed North American companies to expand their representation in the global value creators rankings, the report added. These firms occupy 38 spots among the top 100 value creators, up from 27 in the 2023 rankings. They also hold 41 percent of the top 10 positions in their respective industries up from 38 percent in 2023.

Asia-Pacific companies continue to claim an outsized share, with 51 spots among the top 100 and 39 percent of the top 10 by industry.  

Among the top 10 countries in the report, India occupied fourth position with 109 companies and a 5 percent share among 52 nations. Thirty-nine companies from the country were ranked in the Top 10 industries list with an 11 percent share. Six companies from the country occupied the large-cap segment with an overall share of 3 percent.

Comparatively, European companies remain underrepresented among the top performers. Despite making up 20 percent of the overall sample, they secured only 9 of the 100 leading spots and 13 percent of the top 10 positions across industries.

Road ahead

The BSG report added that many companies will find it difficult to exceed the bullish expectations reflected in the buoyant market. Each company must establish a clear path to growing its business profitably to maintain investor confidence and TSR momentum.

It require investing in innovation, such as artificial intelligence and sustainability, to open disruptive new avenues for value creation. In many cases, real innovations will be essential to allow these companies to navigate market fluctuations and maintain investors’ enthusiasm over the long haul, the report added.

The BCG 2024 rankings analysed the TSR of 2,355 companies across the world from 2019 through 2023. The report excluded companies headquartered in Russia or that have predominantly Russian operations. Argentinian and Turkish companies as these countries’ hyperinflationary environment skews valuations.

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