TEK2day Podcast: Technology, Capital Markets, Entrepreneurship, Leadership, Corporate Governance. Check out our content at TEK2day.com
Ep. 438: More On Management Teams
Quality Companies Outperform Over The Long-Term
We will say it until we are blue in the face: Management Teams Matter.
A high quality management team starts with a high-quality CEO. Quality management teams build quality companies. They do the hard, tedious work required to build the best products and processes in order to deliver maximum customer value. CEOs of these companies typically share certain attributes. For example, they invest for the long-term and work to drive long-term shareholder value. They will not for example chase a short-term “hype” opportunity to drive short-term gains as MicroStrategy (tkr: MSTR) CEO Michael Saylor has done in his pursuit of Bitcoin riches. Quality companies and CEOs such as Andy Florance of CoStar Group (tkr: CSGP), Henry Fernandez of MSCI (tkr: MSCI) and Bill Stone of SS&C Technologies (tkr: SSNC), are in it for the long haul. They won’t chase M&A targets with exorbitant valuations. They won’t roll out flavor of the month products that deliver negligible customer value. They will invest to deliver long-term shareholder value. This long-term approach may translate to underperformance during bubble periods such as the mother of all bubbles that we operate in today. However, quality management teams won’t blow you up. They won’t make poor capital allocation decisions nor deliver poor financial performance. Quality companies do tend to outperform when the economy and markets are soft and when markets are “normal”. Quality companies also tend to outperform over multi-year periods. Below we benchmark CSGP, MSCI and SSNC vs. the NASDAQ Composite. Read full article here: https://tek2day.com/2021/07/08/quality-companies-outperform-over-the-long-term/
Ep. 437: VCs, EVs & The Fed
1.) VCs are not aligned with Entrepreneurs.
2.) Many of these EV CEOs are frauds as are the companies. We told you so a long time ago. It matters who the CEO is.
3.) Fed Chairman Jerome Powell is campaigning for his job to be renewed in February rather than behaving as an adult as the Fed works to inflate the debt away.
CEORater QT: We Expect CEOs & CFOs To Retire At A Record Pace
CEORater Quick Take: We expect CEOs and CFOs to retire at a record pace by year-end 2021 due to the rigors of COVID. Last year it was establishing WFH environments. This year it is defining back-to-the-office policies and executing on them. Lots of CEO and CFO retirement announcements should come between October 2020 and December 2020. We may also see M&A activity spike near year-end as founder CEOs in particular step away from the non-revenue generating rigors of 2020 and 2021.
Ep. 436: Strong Correlation Between M2 and NASDAQ Composite
We compared the year-over-year percentage change in M2 (measured each month) to the year-over-year percentage change in the NASDAQ Composite (measured each month on a one-month lag) and found a strong correlation as measured by a correlation coefficient of 81.7%.
Our analysis covered the percentage change in M2 from April 2020 (when the money supply was increased to combat COVID), through March 2021. We used March 2021 as an endpoint as by then the NASDAQ Composite had traded off and had begun to plateau. Thus it would seem that some of the “free money” mailed to companies (PPP), individuals (federal unemployment relief), and used to purchase government agency bonds as well as corporate bonds (Fed Reserve actions) either directly made its way into NASDAQ-listed names or helped support NASDAQ valuations indirectly. This speaks to the asset inflation brought on by loose fiscal and monetary policy.
Read the full article at this link where you may access our data table in full: https://tek2day.com/2021/06/17/strong-correlation-between-m2-growth-nasdaq-composite-growth/
Ep. 435: Investors Should Ask More of Their Management Teams
One of the great distortions caused by the joint fiscal and monetary policy of 2020 and 2021 is that equities and the lowest-rated non-investment grade credits are two of the all too rare places where investors may earn a return. Savers and Fixed Income investors be damned. Many companies are enjoying their stocks trading at all-time highs. Management teams are getting a pass on lackluster operating performance as a result of their stocks trading higher over 2020 and 2021. To this we say “What about opportunity cost?”
Consider Roper Technologies (tkr: ROP). ROP shares trade at an all-time high, yet organic revenue declined in the most recent quarter on a Y-O-Y basis (we have been critical of Roper’s M&A strategy). ROP is not alone. Many companies are enjoying record valuations with less than stellar operating performance. Don’t fall for the excuse that a company is victim to its industry which may be suffering from COVID or some other such exogeneous factor. If that’s the case, reduce waste, ensure the core business is strong, and look for opportunities to strengthen the company with smart, strategic partnerships and acquisitions. My advice would be to focus on the former at the present moment until such time as valuations begin to pull back.
Ep. 434: Why We Have Inflation
"Rewarding Non-Productive Activities with New Money Leads to Price Inflation":
The punchline is that a significant percentage of new money creation over the past year was allocated to non-productive use cases. “Helicopter” money to individuals and non-performing firms are two examples. When capital is deployed for non-productive use (acquiring cryptocurrencies for example), that capital invariably bids up prices causing asset price inflation. Conversely, recipients that are able to deploy capital in a productive manner (small software development firm for example), create value through production of goods and services (Software products in this case), which does not lead to asset price inflation. Below we have included two charts published by the Federal Government which illustrate our point and speak to the asset price inflation or “bubbles” we have voiced our concern about over the past 14 months. (more....)
Read the full article here: https://tek2day.com/2021/06/09/why-we-have-price-inflation/
Really enjoy this podcast....a great selection of topics! Keep up the important and needed perspective!
Really great flow of interesting info. Fair perspective...
I especially enjoyed the content related to Equifax and Uber. Especially the Board-related material which is not something I'm familiar with.