Last week I wrote a couple of articles on the importance of share market investors focusing on buying founder-led companies with a high proportion of insider ownership.
There's overwhelming evidence that founder-led companies thump the returns of the wider market and it's also common sense that successful businesses run by their founders will outperform the many mediocre companies on the market.
It's even better if you can identify a founder-led business where senior management are also buying up shares on-market as this is a vote of confidence in the future success of the business and valuation of the shares.
One business I identified in last week's articles was Dicker Data Ltd (ASX: DDR), as I don't know of a business on the ASX where senior management and staff are more aligned to shareholders.
Today Dicker Data reported a strong full year result to the market with profit before tax expected to come in at $46 million, which is up 15% on the prior year and 8% above guidance.
Dicker Data's co-founder and CEO reportedly doesn't draw a salary from the business to just live off its dividend payments among other investments, while his ex-wife and co-founder Fiona Brown reportedly draws an annual salary in the region of just $37,000.
Between them the co-founders own more than 113 million shares in a business with just 160.6 million shares on issue and neither of them seem keen on selling. On the contrary they tend to reinvest their dividends in more shares just like the CFO and COO.
Compare that kind of founder-led commitment to the September 2018 decision of the newly-appointed a2 Milk Company Ltd (ASX: A2M) CEO to sell her then entire shareholding in the business worth A$4 million only two months into the job.
Notably, another a2 director sold quite substantial amounts of shares recently in a move that might make some investors nervous.
However, the Dicker Data CEO is taking the opposite approach in awarding all of its more than 400 staff with $1,000 worth of shares last year in order to align staff interests with shareholders, while its long-serving CFO and COO have been backing up the truck to buy more shares in the business over the past year.
Today Dicker Data shares sit back near a record high and the stock continues to offer a big dividend yield and modest valuation as it remains largely under the radar of institutional investors in part due to a lack of liquidity with so many shares in the hands of its management team.
This may present an opportunity for retail investors to pick up shares at still attractive prices given the business has excellent shareholder alignment and potential to deliver strong total returns in the years ahead.
