For the home gamer, identifying top management is brutally hard.
Hey, I am not here to blow smoke. The average investor often lacks the tools that sophisticated investors do and certainly lacks the access. With many years under my belt in financial services, I can almost sniff out a leading CEO by talking with him or her for 10 minutes. The great ones have a keen ability to offer insights you haven't even heard before and then go instantly into step-by-step plans on how they plan to attack a new opportunity. Then, when you head back to the office to dig further into the executive's background and track record, you learn he/she has a history of being ahead of the curve and bringing riches to the company as a result. As for the so-so CEOs, they definitely tend to stick out.
Here are two examples of best-in-class CEOs. Take note of the actions they took. They were done while others in the industry were focusing on the same old things. First mover advantage in business, in my experience, leads to earnings surprises (which go onto taper off as competitors move in) and value creation for shareholders.
On Dec. 31, 2012, coffee king Starbucks (SBUX) announced that it acquired tea purveyor Teavana. Purchase price was a whopping $620 million in cash. At the time, I remember panning the transaction. Teavana's mall stores were over-merchandised with low-margin tea equipment, there were no employees dishing out super-profitable frozen tea drinks as Starbucks stores do with coffee. Further, I reasoned, who wanted to drink tea as Starbucks has hooked us all on caffeine (tons and tons of caffeine).
But, some six months into the integration, I realized what Howard Schultz was seeing: a true global opportunity to do for tea what Starbucks has done for coffee. That meant tea bars (have opened) in major U.S. markets serving $4 drinks. Soon (based on recent chat with the company) Teavana is likely to hit the supermarket aisles in the form of pre-made drinks.
The vision of Schultz hit me hard as I stood outside of the Nasdaq on Friday and saw members of the David's Tea brand hand out free drinks to passersby. In case you missed it, David's Tea went public and the stock surged more than 40%. For a tea brand not many have heard of, it owns about 136 stores in Canada and 25 in the U.S., the new IPO sure did get a hearty valuation. How genius does Schultz's move to acquire Teavana back in 2012 look now? Imagine Starbucks doing that transaction today. It would likely have had to pay closer to $1 billion in this red-hot market for new food/beverage/restaurant issues.
On Thursday, I went to an event for world's largest cruise line Carnival (CCL). I had no clue what the event was for (media was kept in the dark). But the CEO was scheduled to be there, which is usually a sign of a major announcement. It turned out to be the launch of an entirely new brand called Fathom. The brand will be Carnival's 10th and an existing ship from the fleet will be redeployed to handle the new vacation experience. Fathom, as Carnival pitched it to the crowd, will be dedicated to a new concept called impact travel. Impact travel is where vacationers immerse themselves in a port (it will initially be the Dominican Republic for Carnival), helping the community in ways like farming and education. Call it a socially conscious vacation.
Although the market is small as not everyone wants to work on a vacation (if helping others to enjoy better lives is work), in talking with Carnival CEO Arnold Donald I was left the impression the company has done its homework on this initiative. I see no other cruise line company doing impact travel and, over time, I believe it could be a nice niche brand for Carnival.
Hey, if you eat non-GMO food and are obsessed with Whole Foods' (WFM) values, then a vacation on Fathom may be right up your alley.