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Family businesses shine
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January 7, 1997: 12:53 p.m. ET
Investors may profit most from companies run by real families
From Correspondent William Rukeyser
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NEW YORK (CNNfn) -- A new study finds that big corporations controlled by families outrun the pack.
An index of the largest publicly held U.S. corporations that are controlled by individual families has outperformed the S&P 500 over 20 years.
Christopher Davis, a portfolio manager at Davis Selected Advisers, the family money-management business run by his father, Shelby Cullom Davis, says that is because family companies often think long-term and shun risks.
"Family businesses tend to avoid the bet-the-company sort of risks that maybe a professional manager brought in with a shorter-term view, might not feel the same degree of concern about losing their own money," said Davis.
Professor Robert Kleiman, who conducted the stock study, heads the Center for Family Business at Oakland University in Michigan. He thinks family companies also have an edge in focus.
"The family-controlled enterprises seem to stick to their knitting. They tend to focus on their core businesses rather than engaging in unrelated diversification," said Kleiman.
Since 1976 the top performing family-controlled corporations have been:
Not all investment professionals warm to family ownership.
"Often family businesses, or managements that have these characteristics, are unpopular with Wall Street because they spend about no time worrying about quarter to quarter, line by line earnings models," said Davis.
The same trait, however, makes some family companies popular indeed with long-term investors looking for bargains.
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