As the cliche goes, any company’s biggest assets are its employees.So while researching a company, equity analysts try to figure out the ability, motivation levels etc of the employees. In private equity, it is fairly common to touch base with ex employees to get some color on what exactly is happening in the target company.
In this instant age, many analysts instead of actually speaking to employees (or ex employees) get their employee assessments from Glassdoor.
Glassdoor is a website where employees can write reviews about their company and even of their CEO.So these armchair analysts visit Glassdoor, if they see a couple of negative reviews, they conclude “The management sucks” and drop the opportunity.On the other hand, if their reviews are positive, they go ga ga and recommend the stock.
I believe this is a serious mistake mainly because there is no authenticity.You can go right now and write a review of any company you want.So if you want to have positive reviews for your company, you can do so.On the other hand, if you want to spread malicious rumors of a company, just go and write some garbage.
Many analysts have been led down the garden path by relying on Glassdoor reviews for their equity research.Take for example, Arshiya International.A search on Glassdoor indicates “75% of employees recommend this to a friend !”
On the other hand, if you rely on online rants of employees, you will never invest in a TCS,Infosys,Wipro,HCL Tech etc.The employees of these companies are tech savvy and use the net to vent their frustrations etc.
Take for example, TCS. If you google “TCS Sucks”, you will get 269,000 results !Does that mean TCS is a lousy company to invest in ?!!
There is only one way to assuage the employee strength of the company-that is offline.Speak to the employees themselves, they will tell you about the company’s management,sales, competition, outlook etc .
Relying on online reviews is plain lazy, foolish and unprofitable !