According to Fortune, there are 21 founder-led chief executive officers (CEOs) in this year’s edition of the Fortune 500. All seven of the founder-led stocks to buy and hold forever are from this list.
The 21 founder-led CEOs range in age from 37 to 74, with an average age of 37. There are no female founder-led CEOs on the Fortune 500. Between 1999 and 2014, founder-led companies were said to outperform those that didn’t have a founder in the CEO role by a factor of three.
Of the seven stocks listed below, two appear in the top 10 holdings of the Global X Founder-Run Companies ETF (CBOE:BOSS). Over the past five years, BOSS has generated an annualized total return of 11.08% through May 31. While it’s not as good a return as the S&P 500, it’s more than adequate.
Founders that lead their companies are more engaged in the job than outside hires. These seven founder-led stocks have what it takes to continue delivering for shareholders:
|STLD||Steel Dynamics, Inc.||$70.98|
|APO||Apollo Global Management, Inc.||$50.47|
Founder-Led Stocks to Buy: Tesla (TSLA)
To say that Tesla (NASDAQ:TSLA) is a founder-led stock is a bit of a misnomer. While Elon Musk is very much the driving force at the electric vehicle (EV) manufacturer, the company was founded by Martin Eberhard and Marc Tarpenning in July 2003. Musk came along in April 2004, investing $6.35 million in Series A funding. He became CEO in October 2008.
As for the company, it continues to deliver loads of EVs. In the first quarter of 2022, it delivered 310,048 EVs, most of which were the Model 3 and Model Y. As for profits, it generated $2.2 billion in free cash flow in the first quarter (Q1) of 2022, 660% higher than a year earlier. It has generated positive free cash flow in 11 of the past 12 quarters. It finished the quarter with $17.5 billion in cash on its balance sheet.
Tesla currently trades at 13.1x sales, higher than its five-year average, but lower than its multiple over the past couple of years.
Jensen Huang has been Nvidia’s (NASDAQ:NVDA) CEO since founding the company in 1993. Nvidia went public in January 1999 at $12 per share. Even though NVDA stock is down 41% year-t0-date, Huang has still managed to generate a cumulative total return of 23,156% since its initial public offering over 23 years ago.
In January, I suggested that Nvidia stock could be one of 2022’s best bets. While it hasn’t worked out this way, the company continues to deliver great quarterly results. Even though it likely won’t hit $400 in 2022, Huang remains entirely in control.
For the first time in the company’s history, its data center revenue of $3.75 billion in Q1 2023 was higher than its gaming revenue of $3.62 billion. Its data center revenues grew 83% over Q1 2022 and 15% from Q4 2022.
Nvidia trades at 16.3x sales, slightly less than its five-year average of 17.3. All of its major financial metrics are lower than in previous years due to its 2022 correction.
NVDA stock remains an excellent long-term buy.
Founder-Led Stocks to Buy: Salesforce (CRM)
Salesforce (NYSE:CRM) Co-CEO Marc Benioff founded the cloud-based software company in 1999. Benioff believes that companies have a responsibility to not only create great products, but also make a positive impact on the world. CNN Business named Benioff its top CEO of 2020.
Recently, as a result of the mass shooting in Uvalde, Texas, 4,000 Salesforce employees signed an open letter to Benioff and Co-CEO Bret Taylor, requesting that the company drop the National Rifle Association (NRA) as a customer.
I would think that Benioff would be open to meeting the employees’ requests. In 2019, it banned customers from using its software if they were selling certain types of firearms.
Despite Benioff’s focus on bettering the world, Salesforce’s business hasn’t suffered. In Q1 2023, its sales grew 24% year-over-year to $7.41 billion. On the bottom line, adjusted net income was $982 million, 14% lower than Q1 2022.
As for free cash flow, it was $3.5 billion in the first quarter, 14% higher than a year earlier. Its free cash flow for the trailing 12 months through Q1 2023 is $5.7 billion, the highest in its history.
Blackstone (NYSE:BX) was founded in 1985 by Steven Schwarzman and Pete Peterson. Both were former Lehman Brothers veterans. The company went public in 2007, selling $4 billion of its shares. Today, it’s one of, if not the largest, alternative asset managers in the world, with $915 billion in assets under management.
Schwarzman remains CEO despite being well into his 70s. I guess if Warren Buffett can do it into his 90s, the Blackstone founder has lots of years ahead of him.
Blackstone’s assets under management are invested under four primary platforms: Real Estate ($298 billion), Private Equity ($268 billion), Hedge Fund Solutions ($83 billion), and Credit & Insurance ($266 billion). Companies owned by its private equity business include Ancestry, Refinitiv, and SERVPRO.
In the last 12 months through the first quarter, its net income was $5.3 billion, 38% higher than a year earlier. Its assets at the end of the first quarter were 41% higher than a year earlier, as well.
Blackstone is one heck of a fee-generating machine.
Founder-Led Stocks to Buy: Steel Dynamics (STLD)
Current CEO Mark Millett co-founded Steel Dynamics (NASDAQ:STLD) in 1993. He has been CEO since January 2012 and owns 1.5% of the company’s stock.
The steel maker produced lots of records in Q1 2022, including record steel shipments, net sales, operating income and net income. It also had record cash flow in the quarter, providing it with free cash to buy back its shares. It bought back 3% of its stock in Q1 2022 alone.
There is no question the company is benefiting from high steel prices. In Q1 2022, it got $1,561 per ton of steel, 50% higher than a year earlier.
How can you tell that the business is operating at maximum efficiency? The five-year average free cash flow between 2016 and 2021 was $1.5 billion, almost 3x the five-year average between 2011 and 2015. With the company’s new Texas electric arc furnace flat roll steel mill up and running, it’s expected to grow its annual steel production by 25%. That will lead to even greater free cash flow in the years to come.
Block (NYSE:SQ) CEO Jack Dorsey co-founded the company in July 2009. In April 2022, his title changed from CEO to Block Head. Dorsey also served as CEO of Twitter (NYSE:TWTR) before stepping down in November 2021. In May, he also stepped down from the social media platform’s board.
In December, I suggested that Dorsey focusing solely on Block would pay dividends for shareholders. Down 55% year-to-date, SQ stock hasn’t cooperated so far. In the long-term, I have no doubt Dorsey will deliver for shareholders.
NorthStar Asset Management, a Block shareholder, has proposed that the company give up its super-voting shares. It will be voted on at the company’s mid-June shareholder’s meeting. It was on last year’s annual meeting vote, but only got 20% support.
Although Dorsey and co-founder Jim McKelvey own less than 11% of Block stock, they control more than 48% because of the dual-class share structure. As we’ve seen with Shopify (NYSE:SHOP), it can be a hot-button issue with shareholders.
I continue to believe that Dorsey has the financial technology company on the right road.
Founder-Led Stocks to Buy: Apollo Global Management (APO)
Apollo Global Management (NYSE:APO) CEO Marc Rowan co-founded the high-growth alternative asset manager in 1990. At the end of March, it had $513 billion in assets under management, with its Yield business accounting for 73% of those assets.
The company believes that a properly constructed investment portfolio should include 20% to 30% of its assets in alternatives, with equities and fixed income accounting for 40% and 30%, respectively.
Over the next five years, Apollo expects to double its assets under management to $1 trillion, with a majority of those assets focused on its Yield business. In fiscal-year 2022, it expects fee-related earnings of $1.4 billion, with a total adjusted net income of $3.3 billion or $5.50 a share. That’s a reasonable 10.5x its 2022 earnings.
In early January, Apollo completed its merger with Athene Holdings. Apollo now has two operating subsidiaries: Apollo Asset Management, which manages alternative investments, and Athene, which specializes in retirement and reinsurance services.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.