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Stocks With Young CEOs: My Top 5 Picks

Of Forbes' 40-and-under list, these 5 run companies worth owning

   

The most powerful CEO age 40 or under is undoubtedly Marc Zuckerberg, founder of Facebook. But until the social media site goes public in May, it’s still a private company.

In February, Forbes ran its list of America’s 20 most powerful CEOs 40 and under. Of those 20, I believe five run companies that are  good investments.

Under Armour (NYSE:UA)

CEO Kevin Plank founded the company in 1996. His idea was simple — design a t-shirt that enhances performance on the field or in the gym. At age 39, Plank owns 21.3% of the company, controls 73.1% of the votes and is a billionaire. With the exception of Nike (NYSE:NKE), Under Armour is arguably the biggest success story in the sports business.

InvestorPlace.com’s Kyle Woodley did a good job covering Under Armour in March, stating that an investment in UA at this point comes down to a willingness to pay the price — the shares were $101 and change Friday afternoon. It’s O.K. if you decide to pass. But before you do, think back to 1980, 16 years after Nike was founded, when it went public at $22 a share. A $10,000 investment back then is worth $1.59 million today. Under Armour’s at the same point in its history. With some perspective, it’s doesn’t seem quite as frothy.

IDEX Corp. (NYSE:IEX)

When you write about stocks for a living, you get to know a lot of names. I was vaguely familiar with IDEX but had no idea of the breadth of its product offerings until I researched the company for this article. Among its four operating segments is fire and safety, which manufactures the Jaws of Life, the extraction tool that fire and safety professionals use to get people out of their crashed vehicles.

Its other three segments sell equally useful products for agriculture, medicine, chemical processing and many other markets. CEO Andrew Silvernail, age 40, joined the company in January 2009 as vice president and group executive for health and science technologies (HST). Thrust into the role of CEO last August when Larry Kingsley stepped down to become the CEO of Pall Corp. (NYSE:PLL), Silvernail appears more than up to the task.

Recently, IDEX’ HST division acquired Precision Photonics for $20 million. The acquisition strengthens the unit, which saw revenues grow by 47%, to $622 million, in 2011. Earnings are expected to grow 15.6% annually over the next five years. This is a keeper.

Steven Madden (NASDAQ:SHOO)

For those of you who don’t know this shoe company’s story, founder Steve Madden was convicted of stock manipulation and securities fraud in April 2002 and sentenced to 41 months in prison. As part of his sentence, Madden was barred from being CEO.

After serving his time, Madden returned as Chief Creative Officer in late 2005. About the same time, Ed Rosenfeld joined the company in an executive capacity. In March 2008, Rosenfeld became interim CEO. Five months later, he became permanent CEO and has been in the position ever since.

The company appears to be in very good hands with Rosenfeld, now 36. Revenues have grown 129%, to $987 million, and operating profits 191%, to $154 million, under his watch. Most important, the stock has had positive returns every year since the young executive took over and is up 22% year to date.

UMB Financial (NASDAQ:UMBF)

Banking runs in the Kemper family. Since UMB’s founding in 1913 by William T. Kemper, five generations of Kempers have run it. The latest is J. Mariner Kemper, who took the reins in May 2004. Now 39, Kemper exemplifies why age is meaningless in business.

According to a report by investment bank Keefe, Bruyette & Woods, only 45 U.S. banks didn’t lose money in the past decade — and UMB was one of them. Since J. Mariner took over in 2004, earnings per share have grown 96%, and book value per share is up 60%.

It’s no wonder Forbes rates UMB the 22nd best bank in America. In the past five years the stock has averaged an annualized return of 4.8%, versus -10.7% for the regional banks sub-sector overall. This is a quality company.

Zillow (NASDAQ:Z)

This is where you go when you want to know the value of your house. Zillow went public last July at $20 a share, up 75% as of April 20. CEO Spencer Rascoff was one of the four founding employees in 2005, joining as vice president of marketing and chief financial officer. Rascoff became CEO in September 2010.

Although only 36, he has a long history with online ventures. In 1999, Rascoff co-founded Hotwire, the online travel company. Zillow’s 2011 revenues were $66.1 million, with an operating profit of $997,000.

That might not seem like much until you consider that two years earlier, revenues were $17.5 million, with an operating loss of $13 million.

Zillow will continue to experience tremendous growth in 2012, and Rascoff, despite his youth, is the perfect guy to lead the charge. This is the riskiest of today’s five investments but also provides the most upside potential.

As of this writing, Will Ashworth did not own a position in any of the stocks named here. 


Article printed from InvestorPlace Media, http://investorplace.com/2012/04/stocks-with-young-ceos-my-top-5-picks/.

©2014 InvestorPlace Media, LLC

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