Behind most great companies and their stocks is an all-star management team that keeps calling the right shots.
As investors, we tend to forget this. We get caught up in the quarterly earnings reports, the stock price movements, the headline announcement, so on and so forth. We often forget the people running the show. But, while all those other things are very important, they are arguably meaningless without strong management.
Why? Because strong management is what makes a business tick. When a business is ticking in the right direction, that’s when you get all the strong earnings report, the favorable headlines, the big growth numbers and — most importantly — a stock staying on a long-term uptrend.
In other words, it all starts with great management.
With that in mind, let’s take a look five stocks to buy with all-star management teams.
Stocks to Buy: Microsoft (MSFT)
The Executives: Satya Nadella (CEO) and Amy Hood (CFO)
First up, we have the CEO and CFO duo over at global technology giant Microsoft (NASDAQ:MSFT).
Satya Nadella took over as CEO of Microsoft in February 2014, at at time when the company was in crisis mode. Growth had dried up and margins were fading as Microsoft failed to innovate at the same pace as peers. This lack of innovation left Microsoft with a legacy business that was rapidly losing relevance.
Nadella recognized this. He also recognized that cloud services — not disks and hard drives — were the future of enterprise and personal computing. So, from his first day as CEO, Nadella made it his priority to turn Microsoft into a cloud giant. He turned all of its legacy productivity businesses into cloud-based productivity businesses.
The transformation worked wonders. Since Nadella took over as CEO, Microsoft has turned into one of the most important and dominant cloud companies in the world, and MSFT stock is up 280% to all-time-highs.
None of it would’ve been possible without Nadella’s partner in crime, Amy Hood. Hood was brought in as Microsoft’s first-ever CFO about a year before Nadella became CEO. She was instrumental in helping Nadella craft a sensible, high-margin, recurring-revenue business model around Microsoft’s cloud businesses. Since she took over, Microsoft has become a double-digit revenue growth company with rising margins. This powerful turnaround has provided the financial backbone for Microsoft stock surging to all-time-highs.
The big idea? Together, Nadella and Hood took a company in crisis mode and turned it into the most valuable company in the world. So long as they remain at the helm, Microsoft should continue to do great things.
The Executives: Dan Rosenweig (CEO) and Andy Brown (CFO)
Say hello to Chegg (NYSE:CHGG), the connected learning platform that has become a necessary learning assistant for millions of high school and college students across America. Several years ago, Chegg was just a textbook rental company. Then Dan Rosenweig took over as CEO in February 2010.
Later that year, Rosenweig and Chegg acquired Cramster, an online homework helper platform. That platform would become the basis for Chegg transforming from a textbook rental company into a digital ecosystem of on-demand learning services. It started with Cramster’s homework helper services. Then, Chegg threw in things like online textbook solutions, on-demand tutoring, test prep, college application help and source citing.
Without Rosenweig leading the acquisition of Cramster in 2010, none of Chegg’s transformation would’ve been possible.
It also wouldn’t have been possible without Andy Brown, who took over as CFO about a year after the Cramster acquisition. Brown was instrumental in creating a high-margin, subscription-based, recurring-revenue business around Chegg’s suite of online learning services. In so doing, Brown helped turn Chegg into a high-growth, high-margin software company.
Together, Rosenweig and Brown have powered huge gains in CHGG stock. Chegg went public at $12.50 per share in late 2013. Six years later, the stock sits near $35, and most analysts think it will go way higher. If their track record says anything, it’s that Rosenweig and Brown have what it takes to get CHGG stock to $45, and likely even higher.
The Executives: Brian Niccol (CEO)
Although the management team at Chipotle (NYSE:CMG) includes many talented people, the one who deserves the most credit for the impressive turnaround the fast-casual Mexican food chain has staged over the past years is Brian Niccol.
Niccol was formerly the CEO of Taco Bell. Over there, he leveraged menu innovations and unique marketing to turn Taco Bell into one of the most popular dining destinations for young consumers. Niccol became Chipotle’s CEO in February 2018. At Chipotle, he breathed life back into what was a depressed business that was still struggling with fallout from multiple food-borne illness crises.
Specifically, Niccol emphasized menu innovations and rolled out things like queso, Carne Asada and various lifestyle bowls. He pushed forward with health-oriented marketing centered around the phrase “For Real.” He also introduced multiple loyalty programs, rolled out various event-oriented promotions and aggressively expanded the digital business.
The results speak for themselves. Before Niccol took over, Chipotle was struggling. Traffic volumes were falling, and margins and profits were depressed. Today, Chipotle is firing off double-digit comparable-store sales growth, traffic volumes are surging higher, and margins and profits are on the up and up.
CMG stock is up three-fold since Niccol took over as CEO.
The implication is simple. So long as Niccol is leading the charge over at Chipotle, this company should continue to do everything it needs to stay hot, and CMG stock should stay on an uptrend.
The Executives: Mark Zuckerberg (CEO) and Sheryl Sandberg (COO)
There are a lot of people out there who don’t like the duo leading Facebook (NASDAQ:FB). But, if you’re an investor, you love Mark Zuckerberg and Sheryl Sandberg because they have been tremendous in their abilities to not just survive, but actually thrive in the aftermath of crisis.
Zuckerberg created Facebook from his dorm room in 2004. The site went viral, and within a few years, it was the biggest social media platform in the world. Despite its huge success in attracting users, Zuckerberg didn’t have a great game plan for how to monetize all of Facebook’s users. That’s where Sandberg came in. She was a former exec at Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and she knew a thing or two about making money. Thanks to her leadership, Facebook has not just become the most used app in the world, but also the second-largest digital advertiser in the world.
By itself, the fact that this duo turned Facebook into a $550 billion company on digital ads alone is impressive enough. But, it’s surviving 2018 that makes them really special.
In 2018, Facebook came under intense pressure from users, regulators and advertisers amid a series of data-privacy scandals that started with Cambridge Analytica. Most management teams would’ve buckled under the pressure, and most companies would’ve — at the very least — ceded some market share. Neither happened at Facebook. Both Zuckerberg and Sandberg were poised throughout the process, and Facebook came out on the other side largely unscathed.
The big idea? These two are an impressive duo leading a very important company. So long as they remain in charge of Facebook, the growth trajectory will remain robust and shares will glide higher.
The Executives: Shantanu Narayen (CEO)
Last, but not least, on this list of stocks to buy with all-star management teams, we have Adobe (NASDAQ:ADBE) and its visionary CEO, Shantanu Narayen.
The story at Adobe is much like the stories over at Microsoft and Chegg. At the start of the decade, Adobe was a good business. In fact, many would’ve called it a great business. Adobe dominated the creative solutions market, was growing at a nice clip, was sitting on huge margins and producing a ton of cash.
But, when Narayen became CEO in November 2007, he did so with the mindset that preserving the status quo is not a winning strategy. He did what most people thought was crazy — he disrupted an Adobe status quo that was working. He launched the Creative Cloud, a subscription and cloud-based offering that would replace Adobe’s legacy creative solutions.
Why disrupt a status quo that’s working? Because it can be better. Since Adobe pivoted from legacy to cloud, ADBE stock has risen 800%.
Now, Narayen is busy expanding Adobe’s services to include digital marketing and enterprise cloud verticals. These verticals are rapidly growing, and as they continue to rapidly grow over the next few years, Adobe’s revenues, margins, profits and stock price will continue to march higher.
The big idea? Let Narayen keep disrupting the status quo and let ADBE stock keep marching higher.
As of this writing, Luke Lango was long MSFT, CHGG, FB and ADBE.