Deciphering the Human Capital: A New Dimension in Investment Analysis

Oct 22 / Geoff Robinson

In today's knowledge-based economy, companies increasingly depend on their human capital. Investment analysts have recognized the importance of this asset in driving value and growth, and they're incorporating its analysis into their stock-picking processes. This blog post explores how investment analysts can use human capital metrics and where they can find this data.

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What is Human Capital?
Human capital is the knowledge, skills, competencies, and other attributes embodied in individuals that contribute to their economic productivity1. While human capital is not directly represented on a company's balance sheet, it plays a crucial role in its long-term success and competitive advantage.

The Role of Human Capital in Investment Analysis
Analyzing a company's human capital helps investment analysts gauge a firm's ability to innovate, adapt to changing market conditions, and drive sustainable growth. Metrics such as employee turnover rates, training and development expenses, and workforce diversity can provide insights into a company's culture, leadership effectiveness, and potential to attract and retain top talent.

Data Sources for Human Capital Analysis
Many companies are becoming more transparent about their human capital management practices due to increased investor interest and regulatory requirements. Here are a few key sources of human capital data:
  • Company Reports: Many companies include details about their human capital management practices in their annual sustainability reports and other corporate disclosures. This data can provide insights into a company's commitment to employee development, diversity and inclusion, and engagement.
  • Third-Party Surveys: Surveys and rankings from organizations such as Glassdoor, Revelio, Forbes, and Great Place to Work provide insights into employee satisfaction, company culture, and employer reputation.
  • Regulatory Filings: In the U.S., the Securities and Exchange Commission (SEC) now requires companies to include human capital disclosures in annual Form 10-K filings2. These disclosures may include information on workforce demographics, training and development programs, and compensation policies.

Case Study
: Alphabet Inc.
For example, let's look at Alphabet Inc., Google's parent company. In its 2020 Form 10-K filing, Alphabet disclosed several human capital metrics, including total headcount, employee growth rate, and employee demographics. It also discussed its efforts to enhance diversity and inclusion and its investments in employee health and wellbeing3.

Moreover, employee reviews on Glassdoor indicate high job satisfaction, strong leadership, and positive company culture. These data points suggest that Alphabet has a solid human capital advantage, which could be a positive signal for potential investors.


Incorporating human capital analysis into the stock-picking process provides a more holistic view of a company's health and potential for future success. While the value of human capital is intangible and difficult to quantify, its impact on a company's performance and growth prospects is undeniable. As such, it's becoming an increasingly important consideration for investment analysts and savvy investors.

"Human Capital." Organization for Economic Co-operation and Development (OECD), ↩
"SEC Adopts Rule Updating Form 10-K Disclosures." U.S. Securities and Exchange Commission, ↩
"2020 Annual Report." Alphabet Inc., ↩