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At first blush, it might seem like a bad idea to invest in companies people hate, but it turns out such stocks often outperform the market.
Every year, Harris Interactive takes a survey of the 60 most visible U.S. companies to measure their public reputations. Each company gets a score from 1 to 100.
Harris says companies that score in the 55-64 range have "poor" reputations; those that fall in the 50-54 range are "very poor;" and those with scores below 50 are critical.
And yet many of the companies at the bottom of the list did surprisingly well over the past six months. The stocks with the 10 worst reputations – America's most hated big companies – posted an average gain of more than 17%.
That's nearly triple the 6% gain of the Standard & Poor's 500 Index, or the 6.16% gain of the Dow Jones Industrial Average, over the same period.
In fact, only one stock in the bottom 10 of the Harris survey declined – the goat of the 2010 Gulf oil spill, BP plc (NYSE ADR: BP), which fell 4.6%.
Here's a look at the seven best-performing stocks that are among the bottom 10 in the Harris survey.
Seven Hated Stocks That Beat the Market
- American International Group Inc. (NYSE: AIG): Congratulations are in order for insurance giant AIG, which is celebrating its fifth consecutive year as the Most Hated Company in America. The nation has been slow to forgive AIG for its role in the 2008 financial crisis, although a recent PR campaign has helped a little. The company's score of 48.57, which put AIG's reputation in the "critical" category, was actually an improvement over last year's pitiful 46.18. Meanwhile, AIG stock has risen 12.58% over the past six months.
- Goldman Sachs Group Inc. (NYSE: GS): With a score of 49.39, Goldman is the only other company in the Harris survey with a reputation below the 50 critical level. Like AIG, Goldman is still living down the events of 2008. Of course, a public resignation letter from a former broker that depicted Goldman employees seeking out gullible clients they dubbed "Muppets" hasn't helped, either. But Wall Street loves its own, as Goldman stock has soared more than 27%.
- Halliburton Co. (NYSE: HAL): Oil services and infrastructure company Halliburton became famous as the beneficiary of government contracts in Iraq during the Bush administration. Apparently, it was just a coincidence that Vice President Dick Cheney had once served as the company's CEO. More recently, Halliburton has become a major provider of services in the controversial oil and gas fracking industry. Its reputation score was 52.51, placing it in the "very poor" category. However, Halliburton stock is up about 11%.
- Bank of America Corp. (NYSE BAC): While its score of 55.85 is still poor, Bank of America did escape the critical rank it had with last year's 49.85. But as one of the country's big banks, it's still struggling to regain the trust of an American public rattled by the financial crisis and the subprime mortgage debacle. Investors have had no trouble warming up to BAC, however, as it has zoomed more than 38% in the past six months.
- Citigroup Corp. (NYSE: C): Fancy that – another big bank among America's Most Hated stocks. Citigroup's reputation got tarnished with the other big financials back in 2008. Since then, Citigroup's shuffling of CEOs and losses of other key personnel have perpetuated the image of a bank that can't straighten itself out. Citigroup scored 55.90, slightly worse than last year's 55.95. But the stock is up more than 35%.
- JPMorgan Chase & Co. (NYSE: JPM): You'd think JPMorgan would be more hated than several of the other big banks on the list, given the fallout from the London Whale trade, which has cost the bank at least $6.2 billion. But that issue just won't go away, so JPM could move up a few spots next year. Meanwhile, none of JPMorgan's tribulations deterred investors, who have pushed the stock up 18.9%.
- Comcast Corp. (Nasdaq: CMCSA): Given the vitriol directed toward the big cable companies, it's a bit surprising to see only one among the 10 most hated; even then, Comcast just barely made it as No. 10 with a score of 60.99. Then again, a recent MSN survey showed that almost 21% of the Comcast's customers rated its service as poor, a level of dissatisfaction exceeded by only two other companies. Investors have been far happier, racking up gains of more than 11%.
Curious about which company came in first in the Harris survey this year?
That would be Amazon.com (Nasdaq: AMZN), which scored 82.62 – a mark that put it in the 80-and-above "excellent" category.
Amazon just barely edged out last year's champion, Apple Inc. (Nasdaq: AAPL), which slipped from 85.62 to 82.54.
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The 5 Most Overrated Stocks That Retail Investors Love - Harris Interactive:
The Harris Poll Reputation Quotient Survey - MarketWatch:
10 companies with the worst reputations
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.