Every successful business begins with an act of imagination. But the most innovative companies are those that continually reimagine their potential, even if it means radical changes in strategy. This constant focus on the future usually pays off handsomely for investors. Four years ago, Fortune partnered with management consulting firm BCG to create the Future 50, using a proprietary system that analyzes dozens of factors to identify the companies with the best long-term growth potential.
To identify the Future 50, BCG Henderson Institute examined more than 1,000 publicly traded companies with a market capitalization or revenue of at least $20 billion in the 12 months leading up to the end of 2020.
The Fortune Future 50 Index is based on two pillars:
A "top-down" assessment based on identified market potential: 30% of a company's score is based on this market potential, defined as its expected future growth as determined by the financial markets. It is assessed by calculating the proportion of its market value that is not attributable to the earnings stream of its existing business model. A "bottom-up" assessment of a company's ability to generate growth: this represents the remaining 70% of the score. This score includes 19 factors, selected for their ability to predict growth over the next five years, which fall into four categories: Strategy, Capital Expenditure and R&D Capacity, Management and Company Structure.
The average performance of the companies in this ranking generally outperforms the MSCI World Index (comprised of the world's 1,539 largest capitalizations) from the time of its publication. However, 2021 was a tougher year for the 2020 ranking with a slight underperformance compared to the benchmark
There are several reasons for this underperformance:
First, highly valued growth stocks underperformed the market in 2021. Second, Chinese companies have fallen sharply as a result of sanctions and the Beijing government's unaccommodating policy toward the equity market.
Here are the top 10 in this ranking:
The technology sector continues to dominate the Future 50. Companies in the information technology, communication services and e-commerce sectors account for 64% of the index. Enterprise technology companies are still strongly represented with companies like Workday, ServiceNow, Veeva, and Coupa.
As might be expected with the increase in remote work due to Covid, digital collaboration companies like Zoom and Atlassian make up 10% of the index. The growing reliance of companies on digital and artificial intelligence solutions explains the strong demand for cloud-based security and monitoring services, which are also well represented in the index with companies like CrowdStrike, Okta, Zscaler.
The full ranking of the 50 companies is available here.
The study of market history reveals that crises, pandemics and wars reshuffle the deck and lead to new growth opportunities for companies nimble enough to adapt to the new norm. Adaptation and reinvention will remain at the heart of creating a sustainable competitive advantage (also called "moat"). Francis Scott Fitzgerald said, "Vitality is not only the ability to persevere, but more importantly, the ability to reinvent." In other words, uncertainties create gaps. Behind every crisis lies an opportunity for those who know how to seize it.