Publicly traded family businesses offer numerous advantages for investors. Today in „Closing Bell“ we are looking at the reasons that speak for investing in family businesses and why they are the right choice for risk-averse yet return-oriented investors.

Reasons for buying stocks of family businesses Stocks of family businesses often fluctuate less than „conventional“ stocks of non-family businesses. The reason: Family-owned businesses usually have a major shareholder who holds at least 25% of the voting rights. What’s so good about this for you as an investor?

Frequently, the family business owners are also active in the management or supervisory board. This means that the decision-makers are also the beneficiaries of the decisions. In other words: This situation leads to a long-term oriented strategy.

The managers and main owners of the home improvement chain Hornbach summarize this philosophy as follows: „We do not think on a quarterly basis, but in generations.“ This is also evident in the fact that the decision-makers usually stay in the company longer, as it is their life’s work.

You have probably also experienced this: In a world where almost every „hired“ manager thinks about short-term profit and not about the long-term consequences („quarterly thinking“), this attitude is truly an exception!

Stocks of family businesses: Often calmer and more profitable A long-term comparison between family businesses and the Euro Stoxx 50 (which includes the 50 largest publicly traded companies in the Eurozone) shows that family businesses almost always deliver better returns. Stocks of family-owned businesses are therefore not only calmer but also more profitable than „conventional“ stocks.

Another advantage of family businesses: On average, they have an above-average equity ratio. Family businesses in Germany recently had an average equity ratio of 42%. Values above 30% are generally considered solid.

For your better understanding: The equity ratio provides information about the percentage of a company’s total assets that are financed with its own funds – and not with loans or bonds.

Family businesses often emerge stronger from crises A higher equity base gives companies stability and independence from banks during times of crisis (as we are currently experiencing) – all factors that can benefit you as an investor.

And as soon as the markets return to calmer waters and the focus shifts to criteria such as balance sheet quality, level and stability of dividend payments, and earnings power, family businesses will be among the first and biggest winners of this development.

Therefore, as an investor, you should turn your attention in this direction when the majority of other investors (still) do not. This way, you can – as history has shown – benefit greatly from the virtues of family-owned businesses. That’s why in „Closing Bell,“ I regularly introduce you to family-owned businesses.