WARREN BUFFETT, JEFF BEZOS, STEVE JOB- GREAT LEADERS YIELD GREAT INVESTMENTS!

Please click on below link to see a 60 second overview of this week’s blog. Click backspace to return to the blog.

https://biteable.com/watch/embed/leadership-1928968

LEADERSHIP on Biteable.

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When you consider buying a company’s stock, one of the key factors you MUST research, is company leadership, especially the Chief Executive Officer (CEO). The competency of the CEO and his direct reports is the difference between making money on stocks and eating peanut butter sandwiches (We can’t afford the jelly) for a LONG time. Should you trust the CEO with your hard earned money? In many cases, the answer is ABSOLUTELY NOT! I have trusted several CEO’s with my money. Some have been great stewards of shareholders money and others gave me sleepless nights. Here are four, CEO’s I trust. The above chart shows you their results since 2013.

CEO’s I INVESTED MY HARD EARNED MONEY

• APPLE- Steve Jobs {I have invested in Apple stock on seven separate occasions. Zero since Steve Jobs death.}
• Berkshire Hathaway- Warren Buffet – The Oracle of Omaha
• Tesla – Elon Musk- “Iron Man”
• Amazon- Jeff Bezos -Richest Man in the WORLD!

Below chart shows the past three months performance since July 22, 2018.
WARNING: Do your own research before spending YOUR money. Never buy a stock simply based on past performance or because I or anyone else owns the stock.

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NOW LETS LOOK AT NIGHTMARE LONG TERM INVESTMENTS.
When you read another formerly great or good company is declaring bankruptcy, first place to look is the CEO’S magnificent office suite. Typically you will find incompetent, ineffective, selfish and greedy leaders, who have poorly managed a formerly good company. These managers, (WEAK leaders) are unacceptable trustees of your money. To make money in the stock market, become as knowledgeable about the company’s CEO as you are about your In-laws when they asks to borrow $5,000.

Decades ago the US auto industry was powerful, profitable and essentially had zero foreign competition. The few Japanese cars were inferior junk and few Americans purchased German cars. US leaders did exactly what weak, ineffective leaders do; they went to sleep behind the wheel, crashed and burned their companies to the ground! By 2009, foreign car manufacturers made better quality, slicker, sexier and CHEAPER cars than General Motors (GM), Ford and Chrysler. GM and Chrysler declared bankruptcy in 2009. Ford was the only major US auto company not to declare bankruptcy. And not coincidentally, Ford hired an external and competent CEO, prior to the 2009 economic meltdown. The federal government took our tax dollars and bailed GM and Chrysler out. How much do stock shareholders get when a company goes bankrupt? ABSOLUTELY NOTHING!

The foreign automobile companies had over several decades not only penetrated the US auto market but gained > 50% share of the market. What exactly were the CEO’s of American Auto companies doing during the DECADES the Japanese not only caught up but also kicked their weak behinds? Essentially sitting back making sinful, dump trucks of money, fat dumb and happy. They looked only as far as three months in the future, concentrating on meeting the next quarter’s Earnings Per Share (EPS), by any means necessary.

LET’S LOOK AT A FEW MORE EXAMPLES OF BANKRUPTCIES/SLEEPING AT THE WHEEL (IN THE CEO’S HUGE, MAJESTIC OFFICES):

• Toys R US
• Kodak- did you know Kodak invented the digital camera and due to incompetent leadership allowed other companies to dominate the market as their film business died?
• Radio Shack
• American Airlines; United Airlines; Eastern Airlines; Pretty Much Every Major US Airline has declared bankruptcy -WITH EXCEPTION OF Southwest Airlines. (Southwest Airlines had a competent and good CEO in Herb Kelleher)

COMPANIES TODAY ON LIFE SUPPORT- CEO DROWSY AT THE WHEEL

• GE – After 110 years, General Electric was BOOTED OUT of the Dow Jones Industrial Average. GE dropped from a high of $59 to $12.76 by June 21, 2018. Long-term shareholders, retirees, pensioners, etc. lost ~78% of their HARD EARNED MONEY.
• SEARS HOLDINGS. Sears dropped from a high of $123 to $2.37 by June 21, 2018. For those shareholders praying for a rebound, and holding on, they lost ~98% of their HARD EARNED MONEY! OUCH!

The above examples demonstrate a crisis and failure in leadership. There are numerous factors you must study prior to buying a stock. Two key factors are:
• Competency of the CEO and their executive staff
• Earnings GROWTH expectations. Stock prices only go up if you can grow the revenue, earnings and profits. Often times through Multiple Streams of Income (Read Blog Posted June 21, 2018- “The Need for Multiple Streams of Cash Flow -https://wealthbuildingpowers.com/2018/06/21/the-need-for-multiple-streams-of-cash-flow/)

HOW DO YOU LEARN MORE ABOUT CEOs AND FIND THE GREAT ONES WHO WILL MAKE YOUR MONEY WORK HARDER THAN YOU?

• Read their annual reports. And yes most are boring. Two CEO’s known for constructive and valuable annual report, letters to shareholders are Warren Buffett, Berkshire Hathaway, CEO and Jeff Bezos, CEO Amazon.
• Dial in to their quarterly conference calls (you do not have to be a stockholder). You can gain a perspective for the future growth potential and how they handle tough questions.
• Google the CEO and the company.
• Utilize investment research or monitoring web sites such as Morningstar, Bloomberg, Yahoo Finance, etc.
• Check out You Tube videos on the CEO
• Many of the best CEO’s have books written about them and their leadership style
• Talk to your mentor if she owns the stock
• Talk to any employees working in the company you may know. Use LinkedIn to identify your network links to the company.
• DO YOUR DUE DILIGENCE (HOMEWORK- And much better than I ever did my Physics homework!)

REALITY
Recently, Elon Musk made the decision to eliminate 10% of staff positions at Tesla. Clearly he was not making friends. But surprisingly, when many of the laid off employees were interviewed they stated they believed in Musk’s vision and respected him enough that they accepted that this was something that was necessary. Great leaders (think Steven Jobs) are not worried if their subordinates or media reporters like them. Instead, they laser focus on doing what is best for the organization in the long term and their shareholders MONEY.

There are numerous former HORRIBLE CEO’s who are worth millions, some hundreds of millions. I will never understand why when a CEO is fired for poor performance, he/she is paid tens (sometimes hundreds) of millions! For what?

You must do your research as if your HARD EARNED MONEY depends on it, because it does! Never mind if the television talking heads believe the CEO is a nice man or woman. If he is tall, has a full head of hair and can read a TelePrompTer. Vote for him for President, go out and have a beer, but NEVER GIVE HIM YOUR HARD EARNED MONEY- UNTIL YOU RESEARCH AND TRUST HIS COMPETENY! NEVER.

Here is some reality, researching stock picks is time consuming. It can take days of your time. If you have a job, spouse, 2.3 kids, any fun activities, night school, dating (Make sure your spouse does not know about your dating!) etc. do you have the time? Majority of Americans do not. You are a busy hardworking person. If you do not have the time or desire to do the research, invest in an S&P 500 ETF. You will typically (I mean like 90%) have MUCH better returns!

Thank you for being a reader.
All feedback, comments are appreciated and I will reply.

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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