The cover curse: explained

A study explains the business magazine cover curse

We’ve taken grief for decades about the cover curse at BW. When you see a glowing cover story on a company, the common wisdom says, sell. Now a trio of financial analysts has carried out a study of this cover curse at BW, Forbes and Fortune. (ex Andreesen). And they conclude, I’m sorry to see, that there’s something to the curse. Basically, a positive or negative cover story marks the end of a company’s “extreme” behavior, either good or bad. After the cover story, they tend to regress, in their corporate way, toward the mean.

What does this say about us? We don’t run positive or negative cover stories until the writer can come up with quite a bit of evidence: a soaring stock, a hot product, some new manager who’s figured out how to slash costs or conquer global markets. We need, after all, to make a case that the company is hot or cold. But by the time we’ve marshalled our evidence and put together our product, the actors in the drama—from investors to competitors (inside the company and out), are already responding to the conditions we’ve been busy documenting. Their responses bring the period of “extreme” behavior to an end.

Interesting stats in the study. Turns out that between 1983 and 2002, BW wrote more “negative” company covers than the other mags. Some 26% of our covers were deemed negative, while it was 8% at Fortune and 14% at Forbes. 77% of Fortune’s company covers were “positive,” followed by 69% at Forbes and 59% at our place.

Incidentally, I haven’t written a company cover of my own since a 1998 (positive) story on Nokia. I’m happy to report that the company continued to do well for another couple of years, before the whole industry tanked in 2001. But now I see we’ve got a story that they’re soaring again. Been engaging in some extreme activity, it appears…

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