Buoyed by strong capital markets in 2023, the average annual total shareholder return surged across the companies in BCG’s Value Creators database. The median rose to 12% per year from 2019 through 2023—up from 7% per year from 2018 through 2022.
Technology and tech-related companies led the charge, as excitement over generative AI helped to fuel a rebound from 2022’s losses. The landscape is not solely tech dominated, however. Several asset-heavy industrial sectors or recently lagging industries also accelerated their TSR performance compared with last year’s study and now rank near the top of our industry ranking. With global market indices perched at all-time highs, companies across sectors now face the challenge of maintaining or regaining TSR momentum.
For the past 26 years, BCG has been ranking companies on the basis of TSR, a metric that reflects the true bottom line for a company’s shareholders. Over the years, these rankings have yielded tangible insights that help companies create strong and sustainable value over the long term. The 2024 Value Creators rankings detailed in the linked interactive are based on data as of December 31, 2023, and reflect average annual TSR over the five years from 2019 through 2023. The sample includes 2,355 companies across 35 industries.
The 2024 rankings revealed a broad range of TSR performance within each of the industries we studied, showing that all companies have the opportunity to outperform the broader market, regardless of their industry dynamics.
Technology hardware emerged as the standout industry for value creation, boasting a median TSR of 27% per year from 2019 through 2023. (See Exhibit 1.) Value creation was especially impressive among mega-cap companies and semiconductor manufacturers. The software and electrical components industries also maintained their strong TSR trajectory, ranking 5th and 9th, respectively, among the 35 industries.
Not surprisingly, technology and tech-related companies also continue to dominate our large-cap value creators ranking, covering the 200 most valuable companies worldwide. Within this elite group, tech hardware companies secure five of the top ten spots and nine of the top 20. The prominent names include NVIDIA, the top performer, and Apple, boasting a $3 trillion market cap at the end of 2023. Software players, such as ServiceNow and Shopify, also make the list, alongside electric-vehicle giants Tesla and BYD and retail powerhouses PDD and Mercado Libre.
Although high-flying technology companies grab the headlines, our 2024 rankings highlight two other sets of industries that also achieved TSR gains substantially above the market average of 5% compared with last year’s rankings. (See Exhibit 2.)
The first group consists of traditional, asset-heavy industrial sectors. These include mining (ranking 2nd), building materials (3rd), machinery (4th), metals (6th), multibusiness conglomerates (8th), and construction (10th). The strong performance of building materials and construction was driven by the US market which, unlike Europe, sidestepped a recession despite high interest rates. Leading metals and mining companies —TSR laggards through 2018—benefited from a resurgence in investor support during the five years covered by the rankings.
The second group comprises industries that had faced TSR headwinds from 2018 through 2022 but enjoyed strong recoveries in 2023. These include industries that rely on significant consumer spending: automotives (OEMs and component suppliers), consumer durables, and travel and tourism. Investors were apprehensive about such companies during the pandemic years but appear to have regained a degree of confidence based on stronger than expected consumer spending in 2023.
In contrast, several health care sectors—large-cap pharma, medical technology, and health care services—experienced a TSR slowdown, even though their median returns continued to surpass 10% annually. During the pandemic, some companies in these sectors saw profits surge, demonstrating their ability to deliver extraordinary returns thanks to innovative treatments. Now, with a more stable health care landscape, investors appear to be recalibrating their expectations for the long-term prospects of these competitive sectors.
The large number of leading firms in technology and other highly ranked industries, as well as more favorable macroeconomic conditions, has allowed North American companies to expand their representation in the global value creators rankings. These firms occupy 38 spots among the top 100 value creators, up from 27 in the 2023 rankings. They also now hold 41% of the top ten positions in their respective industries, rising from 38% in 2023. Asia-Pacific companies continue to claim an outsized share, with 51 spots among the top 100 and 39% of the top ten by industry. Conversely, European companies remain underrepresented among the top performers. Despite making up 20% of the overall sample, they secured only 9 of the 100 leading spots and 13% of the top ten positions across industries.
Looking ahead, many companies will find it difficult to exceed the bullish expectations reflected in today’s buoyant market. To maintain investor confidence and TSR momentum, each company must establish a clear path to growing its business profitably. This will often require investing in innovation, such as artificial intelligence and sustainability, to open disruptive new avenues for value creation.
Faced with high expectations and the ever-present risk of a market correction, companies in high-flying sectors need to focus on the factors within their control, such as ensuring cost efficiency and investing to foster long-term growth and support their current valuation. In many cases, real innovations will be essential to allow these companies to navigate market fluctuations and maintain investors’ enthusiasm over the long haul.
Companies that have not been riding the recent market tailwinds have greater upside opportunities. They need to gain investor confidence by devising compelling value creation plans and clearly communicating their strategies.
To explore the Value Creators reports through the years, visit our Collection page.
Knowledge Expert, Team Manager
Munich
Managing Director & Senior Partner; Global Leader, Corporate Finance and Strategy Practice
Toronto