5. L’Oreal S.A.
> 1-yr. share price change: +28.14%
> Industry: Cosmetics
L’Oreal was penalized for the use of run-on sentences and ambiguity in its 2011 shareholder letter. One sentence that typified the presence of FOG — sentences that consist of cliches or make little sense — is the French beauty company’s claim that it “has made the most of the diversity and complementarity of its presence in all channels and in all regions to take advantage of the sectors which are accelerating.” Rittenhouse Rankings may be in line with Wall Street analysts in failing to identify what might set the company apart. One analyst from Sanford C. Bernstein told Bloomberg in late 2012 that they believed L’Oreal was just “an average beauty and personal care company.” Results from its most recent quarter also failed to impress shareholders or research analysts.
4. Bank of America Corp. (NYSE: BAC)
> 1-yr. share price change: +97.04%
> Industry: Banking
Bank of America’s 2011 shareholder letter represented an improvement from the year before. The major reason for this was the company’s decision to cut the amount of content from its letter that the study considered to lack facts, confuse readers or consist largely of generalizations. As a direct result, the bank improved its position from second-lowest on the previous survey. However, the 2011 letter failed to adequately answer several key questions, including what the bank considered to be “clear-cut” about its business model, and which metrics it was using to identify its own “risk appetite.”
3. Hewlett-Packard Co. (NYSE: HPQ)
> 1-yr. share price change: +44.79%
> Industry: Computer systems
Hewlett-Packard’s 2011 shareholder letter was the first from Meg Whitman, who had at the time recently unsuccessfully ran for governor of California. Her first letter failed to demonstrate accountability or leadership, according to Rittenhouse Rankings, as fact-deficient generalizations were more common than candor. In one sentence that exemplifies the absence of clear or specific claims, Whitman stated, “[W]e have strong leadership from the consumer markets to the commercial, the industry’s broadest portfolio, unmatched reach and scale, and an exceptionally talented and committed workforce.” In late 2012, Whitman admitted that the company had pursued strategies inconsistently. Despite current attempts to right the ship, HP would not experience growth until fiscal 2015, she said.
2. Humana Inc. (NYSE: HUM)
> 1-yr. share price change: +46.38%
> Industry: Health care plans
Humana’s shareholder letter was roundly criticized by the study as being non-specific, filled with unverifiable claims and rich in jargon. Among Humana’s meaningless or unsupported claims were that it was “the first health benefits company a decade ago to insist on putting the consumer at the center of the health-benefits equation,” and that it possessed “a willingness to enter into unconventional partnerships for the sake of improving outcomes.” Analysts at both Citigroup and Stifel Nicholaus recently downgraded Humana. There also have been concerns about how the Affordable Care Act will affect the company’s bottom line.
1. Cigna Corp. (NYSE: CI)
> 1-yr. share price change: +84.79%
> Industry: Health care plans
No company was less candid than Cigna, whose 2011 shareholder letter included numerous run-on sentences and excessive amounts of jargon, according to the study. In one of its strongest criticisms, Rittenhouse Rankings noted that Cigna used “rhetorical nonsense” in its claims. In one part of its shareholder letter, the company said that it was “harnessing this transparency,” in regards to helping plan participants “conveniently track health care costs.” Cigna’s claim that it was promoting “higher levels of proactive service utilization and greater clinical quality” was also criticized as vague. According to Rittenhouse Rankings, Cigna’s letter failed to build trust with shareholders.
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