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Q&A of the Day – Are Florida Based Companies Better Investments?
Each day I feature a listener question sent by one of these methods.
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Today’s entry: Hi Brian, I love your show! My wife and I appreciate what you do and the unique way you go about your stories, we learn something every day. I have an investment question for you. So many public companies have been historically headquartered in New York and California. As we’ve been seeing so many companies relocate to Florida, I’ve been wondering if it would make sense to prioritize investing in Florida based companies? I’m not looking for specific investment advice, but just perspective on if they’ve proved to be better investments. Thanks!
Bottom Line: You’re so very right about the number of corporate relocations in Florida. A significant contributing factor to the record population growth since the onset of the pandemic in Florida, has been the result of corporate relocations into our state. For most of Florida’s history relocations have been driven by those seeking retirement. As a University of Florida study found in February, the prominent reason was just the opposite. A job. The combination of the move to remote work during the pandemic along with the surge of business relocations has transformed the dynamics of most relocating to Florida and why they’re relocating to Florida. In fact, Florida’s led the country in business relocations over the past year – passing Texas in the process. That’s included over 150 businesses deciding to make South Florida their home. And to your point about where they’re coming from? Over 40% have come from New York. We haven’t been dubbed Wall Street South For nothing. But as cool as it is to gain about a new company a day across the state – do they necessarily make better investments? The answer in recent years has been yes.
The University of Miami’s Herbert Business School keeps what they call the Florida 50 Index. The index tracks the performance of Florida's publicly traded companies compared to their peers in the S&P 500 and S&P 1500 Index. Any way you slice it, Florida’s publicly traded companies have been the biggest winners. In UM’s most recent annual assessment, tracking the past six years' worth of performance (dating back to when UM began tracking the performance of Florida’s publicly companies), they’ve outperformed both the S&P 500 and S&P 1500.
Six-year rate of return:
- S&P 1500: 131%
- S&P 500: 133%
- Florida’s companies: 145%
Florida’s companies haven’t just outperformed the broader market – they’ve done so by a double-digit percentage. Now of course, as you’ll always hear disclaimed when advertised by investment firms, past performance does not guarantee future results. That remains true here, but clearly there’s been something specific to the Florida story. Breaking beyond the company specific stories, there are catalysts with those hubbed in our state which provide staying power to it. According to Chief Executive, Florida’s the 2nd best state in the country for business when measuring a combination of tax policy, regulatory climate and talent availability. Compare that to companies who choose to operate out of the other 48 states. There’s nothing about higher corporate taxes, more regulations and less talent that naturally projects to outperformance. In other words, to simply perform in line with Florida’s companies, other businesses must overcome those natural headwinds. That’s not to say it isn’t possible, but it is a natural advantage for Florida’s businesses and thus investors which invest in them. The other big change for those looking to invest close to home is diversity of investment options.
A look at Florida’s top ten publicly traded performers from last year helps tell the story:
- Chico's (fashion retailer)
- Cross Country Healthcare (healthcare)
- NV5 Global (engineering/infrastructure)
- MarineMax (boating)
- AutoNation (autos)
- Jabil (Electronics Manufacturing)
- Regency Centers (real-estate)
- Affiliated Managers (asset management)
- HCI Group (insurance)
- Raymond James Financial (financial services)
Florida’s top ten performers last year were ironically all from different industries. It’s illustrative of the bigger story here. The diversity of industries, the diversity of opportunities, the diversity of success stories. So, the answer to the question is that Florida’s companies have been better investments and currently have more going for them generally than those based in 48 other states ranking behind us in overall business climate.