Leadership brilliance

4th Sep '16 by Steve L

13 comments 5691 reads

Many thanks to Plank and Ramridge for their contributions in a recent post which prompted me to create this post.

It has been suggested that when buying stock of a particular company you are effectively betting on their management.

The purpose of this post is for readers to suggest particular executives/CEOs who appear to have a reputation and track record for success in their particular field of expertise, some of whom appear to have their fingers in several pies. By keeping an eye on their movements across companies and their stock purchases it may be possible to cling to their coat tails and increase your own probability of investment success. Maybe any names listed here could provide additional assurance when screening stocks for potential purchase.

If I may start the ball rolling with Tony Pidgley (housebuilders), Vin Murria (Software and Computer services), Matthew Peacock (turnarounds) as those that have achieved excellence in their fields.

Would also welcome people's thoughts about how controversial/worthwhile it would be setting up a similar post for managers with a somewhat less successful track record- in entirely one's own honest opinion of course.........

Following mmarkkj777's comments I've added my list of "green flags" and "red flags". Obviously in some cases my rationale is pretty subjective but I would suggest that leadership is used merely as a contributory factor during one's own extensive stock selection process. As far as the red flags go, doing well in the stock market is all about avoiding/cutting the losers and running the winners - the names listed may perfectly well have been victims of unfortunate circumstances outside their control- but I see no reason to take chances with my money when there are hundreds of other investments out there.

Green flags
Who	Where	Why
Tony Pidgley CHM	Berkeley Group	Set up BKG in 1976. A knack of buying his company’s shares at the right time, he bought £1m of shares the day after the Brexit referendum.
Greg Fitzgerald CEO	Bovis Homes	Worked his way up the career ladder in over 30 years at GFRD. Bought £1m of shares the day after the Brexit referendum. Came out of retirement last year to take over at BVS & now invested heavily in BVS shares. Why would you come out of retirement unless you see a compelling business…

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Steve L

21st Jun '18

Thought I'd provide an update on this thread, based on my observations/experiences over the last couple of years. I'd like to add Greg Fitzgerald (Galliford Try (LON:GFRD), Bovis Homes (LON:BVS) ), Andrew Brode (RWS Holdings (LON:RWS), Learning Technologies (LON:LTG) ) Charles Skinner & Alex Dacre (Restore (LON:RST), Marlowe (LON:MRL) ) to my list, whilst applying red flags to companies where the likes of Rob Terry (Quindell), Leonard Seelig (APC Technology (LON:APC), Defenx (LON:DFX) ), Brian Kennedy (Entu, Epwin (LON:EPWN) ) have involvement. About a year ago, and after I published this article, Vin Murria made a massive purchase of over £1m of shares in Softcat (LON:SCT) at 390p, since when the share price has almost doubled. When reputable top tier management buy heavily I believe they are well worth following. Currently hoping Helen Connolly can deliver at Bonmarche Holdings (LON:BON) and also watching the shenanigans at McCarthy & Stone (LON:MCS), a company that, during the 4 year tenure of Clive Fenton as CEO, should have performed far better than it actually has.

mmarkkj777

Hi Firtashia,

That's a great idea, and I would like to contribute later, but in the first instance (and before the list gets very long, can I suggest you make a clearer distinction between the good and the bad (e.g. 2 separate lists). At the moment its switches from one to the other.

Also a short rational for reasoning. This can also be very subjective as some people could be added to the bad list because someone has a beef (losing money can do that, strangely :-) ), but the individual may not actually have done anything wrong.
Conversely, a CEO could be doing a really great job, but didn't do so well first time around.

Just my thoughts.

Hi mmarkkj777, appreciate the feedback. I've edited the article as per your comments.

TheShareWhisperer

"It has been suggested that when buying stock of a particular company you are effectively betting on their management."

I don't agree with this statement necessarily. Most good companies have economic "Moats" which are structural and nothing to do with the management.

shipoffrogs

Good article. I would question though, whether non-executives lead. I think most of the time their role is that of nodding dogs.

tony akram

Luke Johnson seems an obvious good entrepreneur having been involved in Pizza Express back in the day , now involved at CAKE and EHG .

I agree good management is important and all part of overall research

Share Whisperer - fair comment, and it was Peter Lynch who said - "Go for a business any idiot can run, because sooner or later, any idiot probably is going to run it". For cyclical companies- not necessarily bad companies- I would say that management expertise plays a major part in getting companies to survive through the hard times. For example, Tony Pidgley's Berkeley Group (LON:BKG) was not over-leveraged going into the financial crisis and was able to buy land at the bottom of the market. Not sure the same could be said for others in the same sector.

shipoffrogs- I like the comment about nodding dogs, and maybe their influence is limited. I would suggest though that if you were a highly successful executive in your own right, you would not want to be associated with second rate companies, even in a non executive position. Winners like to hang around with winners, so to speak.

Firtashia - agreed, but I think you're lauding their judgement rather than their leadership.

I agree with both of your points Firtashia.

@ Shipoffrogs - Having a moat and having a good management team are not mutually exclusive, they are both important qualitative factors, over and above statistical filtering.
In fact, often the moat has been created by the top management (especially founders if they are still there), by establishing and developing this niche competitive advantage in the first place.
The NEDs might be nodding dogs in a bad company, but good ones provide a wealth of experience to help guide the ship. They also often do other tasks like business development, establishing sources of finance, etc. in the background.

jonesj

Thanks for the article. I suspect it is not just management brilliance, but also having entrepreneurial founder led businesses and/or people with skin in the game, who have the incentives to do well for shareholders.

As far as I know there are no screens for such factors, so they need to be checked the hard way.

I agree that Andrew Brode is a fine example of someone doing very well over the long term at RWS, which I have held for about 8 years, occaisinally adjusting the position size.

WarrantStar

I agree to a limited extent that you betting on the management. But I also think that the moat is very important. A brilliant leader can leave the company, but if there is a wide moat, then it will remain, because the definition of a moat is a SUSTAINABLE competitive advantage.
In addition it's worth considering whether the industry that they are operating in is growing or contracting. There are also lots of numbers to look at eg ROCE.
Unfortunately there is no shortcut to a successful investment, but a great leader is certainly a good start.

cig

Like with fund managers, it is difficult to distinguish skill from luck (where outside factors explain success). Crooks are maybe easier to distinguish from bad luck (Rob Terry clearly wasn’t unlucky).

Hi Cig,

In Companies and investing, its nice to have a bit of skill and luck. Time will eventually differentiate and the skill will show through (The more I practice, the luckier I get...Gary Player, Golfing Legend).
I agree about the crooks, and some seem to have charmed lives.
Personally, I don't think Tom W is working hard enough :-)

Leadership brilliance

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Steve L

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