-
Companies Whose Leaders Will Fight for You
-
What Makes a Visionary Management Team
You’ve probably noticed that many of the stocks we recommend still have their founders in key leadership roles. We like founder-led companies because the entrepreneurial act of developing a vision for a new business and seeing it through its early years to become a successful publicly-traded company is itself a sign of a founder’s emotional and intellectual commitment.
That doesn’t rule out companies without founders as leaders. Many companies whose founders have moved on still have visionary management teams in place, with successor visionaries who have demonstrated a solid track record of business execution.
We also like to see financial skin in the game to align leadership’s interests with those of shareholders. Founders often retain substantial stakes in the companies they built, while successor leaders are more likely to build up their equity through stock-based compensation packages. Either way, it’s comforting to know that the fortunes of key insiders rise and fall with the value of your investment in their company.
For me, the most important part of having visionary management is the vision. You’ll have the greatest conviction in the stocks of companies whose leaders share your own passion for what’s important to you. “Make your portfolio reflect your best vision for the future.” That’s easiest to do when you have a common vision with corporate leadership.
3 Examples of Visionary Leadership Teams
You don’t have to look too far back to see examples among recent Stock Advisor recommendations of exceptional leadership teams with long-term vision.
Just look at UiPath’s IPO registration statement, and you’ll see a clear outline of how the CEO Dines views cutting-edge automation as a historical moment that could finally bring an end to repetitive and monotonous labor. Moreover, Dines’ humble beginnings in Romania opened his mind to global aspirations that many U.S. entrepreneurs never pursue, and the CEO’s vision has built an impressive corporate culture that melds humility with an unending focus on the customer. UiPath is fortunate to have Dines at the helm, and the 88% voting control he gets from his dual-class stock holdings bodes well for the future of the company.
Smart founders often set the stage for a successor to advance their vision to the next level. That was the case with DigitalOcean Holdings (NYSE: DOCN), where co-founders Ben and Moisey Uretsky led the cloud computing services provider through its early history. When Ben Uretsky decided to turn his attention to other projects, DigitalOcean brought in Yancey Spruill to replace him as CEO. Spruill’s vision follows in his predecessor’s footsteps, with an emphasis on democratizing cloud access to hundreds of thousands of small and midsized businesses. A rare combination of innovation and simplicity with a healthy helping of strong relationships with developers has helped Spruill make DigitalOcean more successful than ever.
My personal favorite story on leadership is ServiceNow (NYSE: NOW). Founder Fred Luddy was a key leader for more than a decade, but when it came time for him to step back from day-to-day operations, he attracted top executives to replace him, with current Nike (NYSE: NKE) CEO John Donahoe serving at ServiceNow from 2017 to 2019, followed by former SAP (NYSE: SAP) CEO Bill McDermott. McDermott has dramatically expanded ServiceNow’s vision beyond IT workflows to take on the much-larger addressable market as a platform-of-platforms service provider, and his drive to take maximum advantage of available technology stands to send ServiceNow to the next level.
Finding Great Managers
Fortunately, you don’t have to be an expert to evaluate management teams. I suggest just listening to quarterly conference calls or reading transcripts to give you a flavor of a manager’s style and knowledge. Video interviews and print coverage can add background and let you form your own opinion of a manager’s capabilities.
Having visionary leadership on your side gives you comfort and security in turbulent markets. By knowing your company has a leader who’ll fight for you, it’s easier to weather stock downturns and focus on the strength and growth prospects of the businesses in which you invest.
-
This discussion was modified 3 years, 1 month ago by
DaveR.
-
This discussion was modified 3 years, 1 month ago by