As investors, we buy, sell, and hold shares in companies all the time. Before selling or buying a stake in a company, savvy investors will research, research, and research some more. I know it may be hard to believe, but I love rolling up my sleeves and diving into this kind of research. If you know what to dig for and how to find it, there’s a story in that sea of numbers and reports, and it’s the story you want to uncover before you invest your hard-earned money.
Every company is different, so your research for one company may go down a different path than for another company, but there are basics like earnings, sales, growth catalysts, valuation, how the company treats shareholders, and much more. And there’s one question I make sure to answer every time: How is the CEO affecting the company?
The Chief Executive Officers are the big bosses, and the buck always stops with them, whether they like it or not. If a company is in the right hands, it can soar. But if the wrong person is steering the ship, the company can just as easily crash and burn. So if I don’t like the changes a CEO is making, I’m going to get out of that stock as fast as I can (and visa versa).
- Urgent Alert from Hilary Kramer: A 1987-style crash may be the least of our worries
In my media appearances, we’re sometimes asked whether to rate people or trends the same way we rate stocks: buy, hold or sell. So just for fun, here are five popular CEOs and how I would rate them right now. Let’s take a look.
Elon Musk: Ever heard of Tesla (TLSA)? (My GameChangers subscribers made money on Tesla back in 2010, right after it went public.) This man is the success behind the company. Musk is the co-founder and is currently the head of product design at Tesla Motors. As you may very well know, Tesla has been extremely successful. In the year-to-date, shares have risen nearly 210%. Tesla Motor’s success is very much because of its CEO. Musk resembles Steve Jobs and is, without a doubt, a genius. He is on the cutting edge of technology, innovation and style. If you want to be in on someone changing the world, Musk can do it. He sees where the puck is going. A strong buy.
Jamie Dimon: He is the CEO of JPMorgan (JPM). I have no doubt that Dimon will move JPM to a higher level. He was smart in managing risk during 2008-2009. Dimon picked up Bear Stearns for nearly nothing and then was able to enjoy immunity against the risks associated with Bear Stearns. (The recent losses by the notorious trader, the Whale, shouldn’t have happened, but Dimon’s positive moves outweigh that). Dimon knows how to manage costs, compensate those that are talented professionals and keep expertise and institutional knowledge within the bank. Even if he leaves JPM, he will have a top #1 position at another global bank or as Treasury secretary. A strong buy.
Steve Cohen: This man is the founder of SAC Capital Advisors, a Stamford, Connecticut-based hedge fund focusing primarily on equity market strategies. Cohen created a silo contemporary hedge fund that knows how to be stealth and fast and make money. I see Cohen as a rare fund manager. I think one day he will have a private family fund with his own billions. A buy.
Michael Dell: This is the founder and CEO behind Dell (DELL). It would be an understatement to say that Dell has not done well. In the company’s most recent earnings report, DELL posted a 79% decline in earnings, as rising tablet and smartphone demand caused traditional PC sales to slide further. Michael Dell’s company is in serious trouble. Why? He missed the tablets, the last decade of opportunity that came with changes to the technology landscape and shareholders paid the price. This CEO is a sell.
Ron Johnson: The man who single-handedly brought down JC Penney (JCP). Johnson had all the tools given to him by the board of JCP so that he could transform the company. He was the Senior Vice President of Retail Operations at Apple (AAPL) where he rolled out the Apple Retail Stores and the Genius Bar.
Before Apple, he was the vice president of merchandising for Target (TGT). Clearly, Johnson didn’t understand or know his consumers at JCP and he underestimated the value of the employees that worked loyally at those stores. It is also important to note that the hubris of his spending while in the corner office really turns off Wall Street investors — it is always better to err on the side of living more like other employees than walling oneself off with private jets and closed door offices. A strong sell.
To hear more about my thoughts on the CEOs, take a look at the video below.