Most Innovative Does Not Mean Best Investment

It's reality-check time for the 2010 Most Innovative Companies ranking, and for now, at least, reality is that while the list may spotlight the world's best generators of fresh products and services, these are not the best investments.

We published this year's roster three months ago. The list is based mostly on a survey of top executives around the world conducted by our long-time partner in the annual project, Boston Consulting Group. But the lineup is adjusted for financial performance including stock return. If we were presenting the ranking today, it undoubtedly would look different.

Of the 23 publicly traded companies in the Top 25, 13 underperformed the Standard & Poor's index of 500 stocks over the past three months. (And it's not that the S&P 500 has done all that well; it's down 11 percent since mid-April.) Just three honor-roll members were actually up: Apple, BMW, and Hyundai. By sector, only automotive came out ahead.

The laggards included seven of the Top 10, with every one of them--Google, Microsoft, Amazon.com, LG Electronics, BYD, General Electric, and Sony--down 18 percent or more. The biggest loser overall was 23rd-place Nokia; its share price has tumbled 45 percent since it was named one of the Most Innovative Companies of the year.

I'll check back in three more months to see if our ranking correlates more with stock performance. Meantime, what do you think this says about the power of innovation?

Posted in: Innovation,Investment