By Mark Hulbert
Unloved companies with rock-bottom expectations are the real engines of your portfolio
Apple has been an exception to the stock market's &#34;most-admired&#34; trap.
Popularity on Wall Street is a double-edged sword. Remember that as you peruse Fortune's recently published roster of the world's most admired companies - the magazine's annual ranking of corporate reputations. Being at the top of such a ranking can push a company's stock to quick highs at the cost of long-term performance.
Fortune's ranking reminds me of the notion that the most popular high-school students often go on to lead sad lives. This impression is more than anecdotal, according to Ralph Keyes's famous 1977 book, &#34;Is There Life After High School?&#34; He wrote that there is an inverse relationship between high-school popularity and success later in life.
This inverse pattern was apparent in the stock market over the past year. The 10 most admired companies in Fortune's year-ago ranking underperformed a group of companies with the worst reputations.
(Fortune does not publish the companies at the bottom of its ranking. I compiled this underperforming list by focusing on the companies with the worst reputations in an Axios Harris 2024 poll of the companies with the most visible brands.)
The 15 top companies on Fortune's 2025 list lagged the S&amp;P 500 SPX , on average, while the companies with the worst reputations significantly outperformed the market - as you can see in the chart above.
Not all highly admired companies underperform those with terrible reputations. Apple (AAPL), for example, has been at the top of Fortune's most admired ranking for 19 straight years; over this period, its stock has far outpaced the U.S. market average.
Apple is more the exception than the rule, according to a study in the Journal of Corporate Finance. Entitled &#34;When is good news bad and vice versa? The Fortune rankings of America's most admired companies,&#34; the study analyzed Fortune's &#34;most admired&#34; annual rankings from 1992 through 2012, and found that, on average, an increase in a company's ranking led to reduced stock performance on average - and vice versa.
Trappings of CEO success
The stocks of CEOs' companies fell 60% on average over the three years after they became superstars.
A related study sheds light on why this inverse relationship exists. Entitled &#34;Superstar CEOs,&#34; it focused on CEOs who attain &#34;superstar&#34; status, as measured by, among other criteria, their company's ranking on &#34;most admired&#34; lists. The stocks of these companies fell 60% on average over the three years after they became superstars.
At the same time, as their compensation increased, they wrote more books, appeared on the covers of more business magazines, went on television more often and joined the boards of directors of more outside companies.
I suppose one can come up with a narrative for why such outside activities conceivably could benefit a company whose CEO becomes a superstar. But I know of no possible narrative to justify another result in that study: that, after these CEOs became superstars, their golf scores improved.
We should remember what Warren Buffett, the recently retired CEO of Berkshire Hathaway (BRK.A) (BRK.B), once said of CEOs who got involved in outside activities: &#34;The best CEOs love operating their companies and don't prefer going to Business Roundtable meetings or playing golf at Augusta National.&#34;
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
Plus: Here are 7 charts guaranteed to stress you out about the stock market
More: The Dow transports' steep takeoff isn't the green light you're told it is
-Mark Hulbert
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
02-21-26 1448ET

AAPL

AAPU

AAPB

AAPX

The article discusses the trend that popular companies often underperform in the stock market, with Apple being a notable exception. It highlights that the most admired companies, according to Fortune's rankings, tend to have lower long-term stock performance compared to less popular firms. A study indicates that an increase in a company's admiration ranking can lead to reduced stock performance. Additionally, the phenomenon of 'superstar CEOs' is explored, revealing that their companies often see a decline in stock value after gaining fame. The piece emphasizes the importance of focusing on less popular stocks for better investment outcomes.

- The article discusses the correlation between a company's admiration and its stock performance, highlighting that popular companies often underperform.  
- Data shows that the ten most admired companies consistently lagged behind less-reputable firms in stock returns over the past year, with Apple noted as an exception.  
- Research indicates that when companies gain admiration, their stock performance tends to decline, suggesting that CEO distractions from business operations can negatively impact their firms.

Buying stocks everyone loves is a recipe for underperformance - but Apple breaks the rule