Over the last couple of years, I’ve noticed that some of the best businesses on the ASX have been driven by their founders. For example, iiNet Limited (ASX: IIN) founder Michael Malone was able to grow the company from his parents garage into a $1.2 billion company over 20 years. Part of the reason iiNet has succeeded is because of its founder’s passion for providing top-notch customer service.
Although Mr Malone has left iiNet, there are plenty of other ASX-listed companies that are still guided by a passionate founder. Indeed, it is that passion which makes founder-leaders so valuable. In my view, a passionate founder is unlikely to take a huge salary while running the company into the ground. Of course, hubris can bring down any organisation, and founders are human too. Nonetheless, where a founder takes a substantial portion of his or her “pay” in the form of a dividend, incentives are aligned nicely.
More importantly, because founders are human, most of them really care that their company succeeds over the long term. It’s only natural to feel an emotional attachment to an organisation you’ve built up from scratch. More often than not, they stick to it, even when times are tough.
This is a valuable trait: all too often short-term thinking brings a company to its knees. Fairfax Media Limited (ASX: FXJ) and Forge Group (ASX: FGE) are great examples of the destruction of shareholder wealth that ensues when the board of directors lacks a long-term view. The odds that a company will be a good long-term investment are better when the founder (with a long-term view) remains influential.
Without further ado, here’s a list of 10 founder driven and guided companies on my watchlist. Please note that figures are approximate and the remuneration refers to FY 2013 remuneration, according to the most recent annual reports. The shareholdings do not include options.
Anteo Diagnostics Limited (ASX: ADO) Recent share price: 25c
Founder: Dr. N Joe Maeiji
Position: Chief Scientific Officer
Shareholding: 6,315,781 shares
I recently sold some of my shares in Anteo Diagnostics for 26.5c as part of my attempt to reduce my exposure to speculative stocks.
My Net Fone Limited (ASX: MNF) Recent share price: $2.10
Co-Founder: Rene Sugo
Shareholding: 14,488,955 shares
Co-Founder: Andy Fung
Position: Non-executive director
Shareholding: 14,488,955 shares
My Net Fone continues to perform strongly as a business, but I recently sold some of my holding at slightly above current prices.
United Overseas Australia Limited (ASX: UOS) Recent share price: 53c
Co-Founder: Chong Soon Kong
Position: Executive Chairman/Chief Executive Officer
Co-Founder: Pak Lim Kong
Position: Executive Director
Shareholding: 596,265,136 shares
United Overseas Australia recently released its annual reports, demonstrating once again that the company trades well under intrinsic value. I believe that it is consistently undervalued because the founders have complete control, there is very little liquidity, the company’s operations are based in Malaysia and the accounts are somewhat complex (because it is a holding company).
Seek Limited (ASX: SEK) Recent share price: $17.15
Co-Founder: Andrew Bassat
Shareholding: 13,942,506 shares
Seek has performed outstandingly as a business, and in light of recent share price movements, I was a fool to have sold my shares.
Vocus Communications Limited (ASX: VOC) Recent share price: $4.72
Founder: James Spenceley
Shareholding: 4,200,000 shares
Mr Spenceley recently sold 1,800,000 shares on market. Vocus recently undertook a capital raising, and I recently sold some of my holding at $5.
Reckon Limited (ASX: RKN) Recent share price: $2.05
Co-Founder: Greg Wilkinson
Position: Non-executive chairman
I think Reckon is currently trading at attractive prices as it transitions to providing cloud based software as a service under the new brand Reckon One.
Caresales.com Limited (ASX: CRZ) Recent share price: $10.90
Founder: Greg Roebuck
Shareholding: 5,382,891 shares
Carsales is one of the companies that has overseen the destruction of newspaper businesses in Australia. If you want to buy part of the advertising ‘rivers of gold,’ Carsales.com is one of your options.
The companies mentioned above have all made early shareholders ridiculous amounts of money, thanks in part to the ingenuity, passion and drive of their founders. Reviewing my portfolio, it seems that over 85% of my companies benefit from the contribution of their founders; that’s a situation I’m happy with.
Of the companies mentioned above, I currently think that Reckon and UOS trade at the most attractive prices. If you’re interested in founder driven companies, let me know or sign up below, and I’ll continue to explore this theme in subsequent articles.
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Motley Fool contributor Claude Walker (@claudedwalker) owns shares in United Overseas Australia, Anteo Diagnostics, Vocus Communications and My Net Fone.