Billion Dollar Quarterly Research & Development Club: Who Turns R&D Into Stockholder Gains?

Looking for stocks with long-term growth potential? Theoretically, at least, companies pouring money into researching new products should offer great shareholder returns, as laboratories churn out patentable and marketable inventions.

Using the YCharts Stock Screener, we identified 20 companies that spent $1billion or more on R&D during the most recent quarter.

Nine are pharmaceutical concerns – Norvartis (NVS), Pfizer (PFE), Merck (MRK), Johnson & Johnson (JNJ), Sanofi (SNY), GlaxoSmithKline (GSK), AstraZeneca (AZN), Eli Lilly (LLY) and Abbott Labs (ABT) – and of course that industry has been famous in recent years for failing to produce new blockbuster drugs to replace those with expiring patents.

Not a pretty picture:

Novartis Stock Chart by YCharts

GlaxoSmithKline Stock Chart by YCharts

Five of the tech/telecom companies investing heavily in R&D – Microsoft (MSFT), Nokia (NOK), Cisco (CSCO), LM Ericsson (ERIC) and Canon (CAJ) saw stock declines over the past five years.

Microsoft Corporation Stock Chart by YCharts

Four rewarded their shareholders, interestingly International Business Machines (IBM), an old-line tech firm, leading the way among Oracle (ORCL), Intel (INTC) and Google (GOOG).

International Business Machines Corporation Stock Chart by YCharts

Two what might be called industrial companies, Honda Motor (HMC) and Siemens (SI), also lost ground for shareholders.

Honda Motor Stock Chart by YCharts

At huge pharma and tech companies, R&D spending comes with the territory, and without it some of these companies would have performed far worse. But it’s no predictor of superior shareholder returns.