The best ASX CEO you’ve never heard of

A compound gain of 28% per year for a decade…

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shares record high

Buffett. Jobs. Gates. Musk. Welch.

The names of some of the men (yes, only men, unfortunately) considered to be among the best US CEOs of the last century.

And here in Australia?

We don’t tend to lionise our corporate titans in the same way. I don’t think that’s a bad thing, for what it’s worth — CEO salaries are already high enough, without turning them into celebrities (leading to even higher pay demands).

Just think about it, though. If you were asked to name some of the best Australia CEOs of the last 20 – 30 years, how many could you think of?

And how many of those are based more on name recognition than on real performance?

Brian McNamee, formerly of CSL? He’s a top 10 finisher, for sure.

Chris Roberts, previous long-term Cochlear CEO? I think so.

But how many people would recognise those names, or from where?

Macquarie’s Nicholas Moore, suggested by my colleague Kevin Gandiya, is also worthy of inclusion, as is Kevin’s other suggestion, TPG Telecom’s founder and CEO, David Teoh. 

Soul Pattinson’s Robert Millner, no longer CEO but currently Executive Chairman, presided over a decade and a half of market-beating performance from the investment conglomerate. (Disclosure: I own Soul Patts shares.)

And Andrew Bassat, who runs employment classifieds powerhouse, Seek, was suggested by another colleague, Anirban Mahanti, and he’s done a stellar job.

Still, not exactly household names.

The best known is probably Gerry Harvey, of Harvey Norman, who almost single-handedly built the concept of the ‘category killer’ we know today.

And if we’d asked the question in 2010? Or 2007? Or 1999? I dare say we’d have a different list again.

That said, each of the men listed above belongs in any list of the best CEOs of the past two decades.

Skill? Definitely.

Luck? Certainly.

Life is far more of the latter than people want to admit, making it necessary. But without the skill to capitalise on it, the luck is wasted.

I want to add one more name to that list.

First, let me give you some numbers. Over the past 10 years, the company he runs has grown sales at a compound annual rate of 12.9%

Per-share profit has grown at 21.8% per year over the same period.

And the shares? Total shareholder return has compounded at 27.8% per year for a decade, turning $10,000 into just shy of $125,000.

The company? Health insurer NIB Holdings Limited (ASX: NHF).

Its CEO is Mark Fitzgibbon.

NIB has succeeded for lots of reasons — as with the CEOs above, part luck and part skill.

It’s done well by being different — targeting different customers, being based in Newcastle, and — crucially — looking for growth outside its core business of Australian resident health insurance.

(While it’s hard to compare the company with its closest listed rival, Medibank Private, as the latter is only relatively recently listed — and may well have been listed at too-high a price — it’s worth noting that NIB has added shareholder value at roughly double the rate of Medibank over the past three years.)

I don’t think anyone would have picked a small, regional, health insurer to compound shareholder returns at almost 28%. Those numbers are supposed to be delivered by technology start-ups, not financial services companies.

To be sure, a lack of claims inflation and the number of procedures being undertaken have helped the company, but NIB has done very well with the cards it has been dealt.

I, unfortunately, haven’t… at least not as far as NIB is concerned.

My first mistake?

I was given NIB shares in the company’s demutualisation. I sold them at one-dollar-something.

The shares are now selling for about $7.25 each.


The second mistake?

Health insurance is a tough industry. With large, dominant players. And with high and rising healthcare costs. 

So, after recommending the company to members of Motley Fool Share Advisor back in 2013 as a Buy at $2.25 per share, I decided to downgrade it to Hold at $3.10.

Now, members who followed that initial recommendation have enjoyed almost exactly $5 in capital gains, and a good whack of dividends over the past 5-plus years — for a total shareholder return of 325% at last count — but it’s a reminder that you should never underestimate a quality business.

On the plus-side, at least I’ve never recommended our members sell their shares! I should have taken my own advice (albeit some years earlier)!

Foolish takeaway

There are many lessons here.

First, buy quality companies.

Second, be slow to sell, if you’ve found quality.

Third, don’t be too shy to buy more. If in doubt, back quality over price every time.

Fourth, don’t fall for the line that you should only buy the stocks everyone else is buying — that’s a one way ticket to high prices (and likely over-valuation) that will crimp future returns.

Fifth, did I mention don’t sell?

Mark Fitzgibbon and NIB don’t get too many headlines, outside of earnings season. It’s not a ‘sexy’ stock, nor is it seen by most as a ‘blue chip’.

Yet it’s shown most of the ASX a clean pair of heels over the last decade.

That’s the benefit that comes from taking the time, and making the effort, of research. 

And the value in sometimes going against the crowd.

Fool on!

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings 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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