Earlier in the week I wrote an article on the importance of retail or self-directed SMSF type investors buying companies run by their founders. There’s a lot of academic research that suggests founder-led companies thump the returns of ordinary businesses and not for nothing either.
After all it is common sense that a successful founder-run business has a passionate leader that knows the business inside out and its growth opportunities better than anyone.
While the majority of other companies on the local S&P/ ASX200 Index (ASX: XJO) will change CEOs regularly and commonly be guided by a desire to steady the ship and keep staff happy, rather than growing the business. Or a career CEO may simply be appointed and mandated to slash costs across a business which might work out over the short term, but rarely delivers growth over the long term.
So let’s take a look at three founder-led businesses on the ASX and one NASDAQ-listed flyer with strong track records.
Hansen Technologies Limited (ASX: HSN) is led by Andrew Hansen the founder’s son and has a decent track record of growth in roughly tripling in value over the past 5 years when including the beneficial effects of dividends. Hansen’s growth strategy is organic and acquisitive, although its recent interim profit report was disappointing. As such investors might want to keep it on the watch list for now.
SEEK Limited (ASX: SEK) is still run by co-founder Andrew Bassatt and has a reputation for investing heavily to grow its competitive advantages and long-term growth.
For example SEEK’s ANZ business invested heavily in tech developments for its jobs listings boards to defend its competitive position, while other new businesses like free jobs board Jora are also being invested in.
Overseas it’s been pouring money into growing Chinese website Zhaopin’s market share and revenue growth. This has come at the expense of profit growth over the short term, but may prove smart over the long term given the size of the Chinese market.
SEEK also has dozens of other ‘early stage venture’ businesses it’s investing in overseas and in Australia, any number of which could contribute to growth over say a 3 to 5 year time horizon.
ResMed Inc. (ASX: RMD) is probably my pick of the local bunch as it is run by Mick Farrell its founder’s son and boasts a superb track record of profit, dividend and revenue growth.
It’s expanding into the software-as-a-service or digital health space for the long term, but the main game remains the global sales of its masks and associated products to treat sleep apnea. This is a business I like and I’d rate the stock a buy at $14.14 today.
Alteryx Inc. is a NASDAQ-listed database-as-a-service business that is growing strongly in both Australia and the US. It is founder led and appears to have a decent moat given its blue-chip client base and technological edge, while its attractive economics could see it boast big profits long into the future. The stock has been going gangbusters, but there may be more good times ahead.
These 3 stocks could be the next big movers in 2020
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Tom Richardson owns shares of ResMed Inc.,SEEK Limited and Alteryx.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hansen Technologies. The Motley Fool Australia has recommended ResMed Inc. and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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