Pfizer is the smartest company in the Dow. That’s according to Talent Growth Advisors' annual assessment of the 30 companies that make up the Dow Jones Industrial Average.
The organization uses an accounting-based method to calculate the value of intangible assets, such as patents, brands and proprietary data, and then determines that percentage of market value as an index to rank the companies.
“It is fair to say Pfizer is the smartest company in the DJIA, dollar for dollar. Tech, pharma, and consumer (companies) vied for the top spot, but Pfizer wins in 2016,” Tom McGuire, Talent Growth Advisors' co-founder and managing partner, said.
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Pfizer was followed by Boeing, Apple, Visa and Johnson & Johnson in the top five. Merck also scored well, coming in at No. 12 with an index score of 0.91. That’s above the average of 88% of enterprise value from company intellectual capital. Pfizer was No. 2 in last year’s survey, the first year Talent Growth Advisors published the results after doing the assessment internally for years.
The formula does include intellectual capital assets that may have been acquired. That was relevant in Pfizer’s case for 2016, when about 45% of its total intellectual capital was acquired, McGuire said. That figure is high compared with the average of 17% across the others in the Dow.
Still, "one conclusion you can make is that their R&D efforts are paying off. Pfizer has gotten a lot of its growth in general in acquisition and they made a lot of acquisitions in 2016, but overall the generalization would be those R&D investments are paying off,” McGuire said.
McGuire and co-founder Linda Brenner were not surprised at the pharma companies' good showing; the companies are driven by patents and patents pending in their pipelines, which are all intellectual capital. Technology and consumer goods companies also do well for the same kind of reasons: Technology is almost purely intellectual, and consumer goods companies are driven by brands.
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"Having a high intellectual capital value is a very good thing," he added, though "it does mean that they have to continuously seek out the best people that they can hire and retain them. That is the key to building success in the pharmaceutical industry."