Recently I’ve written a few articles on the importance of buying founder led companies as an investor.
I’ve covered how a lot of academic and professional investment research also shows that founder-led companies tend to heavily outperform their more mature peers.
In fact for what it’s worth I personally have at least 50% of my investment portfolio in companies run by their founders, as I am convinced that this is one of the best ways to put the odds in my favour of beating the market.
Of course it’s no use buying any old founder-led companies though, as there are plenty on the local share market that have proven terrible investments due to a lack of revenues, profits, or basic execution of business plans.
So assuming we must apply the golden rules of finding profitable companies, with healthy balance sheets on attractive valuations, let’s take a look at a few companies potentially positioned to keep growing strongly.
Dicker Data Ltd (ASX: DDR) is a business I’ve covered plenty of times over the past years thanks to the fact its two founders David Dicker and Fiona Brown still own over two-thirds of the business.
Its chief operating officer has also bought a significant amounts of shares recently. Just today the stock is up 6% on news of a new business plan, while it’s also been able to deliver consistent double-digit profit and dividend growth. The stock can be volatile due to a lack of liquidity, so some patience could see investors obtain a better price than the $5.25 it changes hands for today.
MongoDB is listed on the tech heavy NASDAQ index in the U.S. and is a tech disruptor in the non structured query language (SQL) database space growing like a weed thanks to the improved functionality of its database-as-a-service platform.
Its still led by its founder and chief technology officer Eliot Horowitz, among other leading data scientist types, and has a business model (offering free to paid services) that may offer a huge growth runway ahead.
Magellan Financial Group Ltd (ASX: MFG) is the founder led international equities business I’ve also covered plenty of times before.
One of its principal advantages as a founder led business is that it can retain a good control on costs and hiring.
The latter of course (quality of staff) is key to running a successful funds management business. Magellan’s cost-to-income ratio is low and it still invests heavily in institutional business development and retail distribution. The stock has run hot recently perhaps on rumours that it may benefit from the blowing up of Neil Woodford’s investment fund in the UK as it has a relationship with the same adviser in St James’s Place.
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You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of and has recommended Dicker Data 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.