What makes corporate managers tick for their shareholders? In our experience, nothing drives long-lasting superior performances better than an owner mindset. What exactly does that look like on the ground? Common traits include thinking long term, willingness to take short-term risks, being purpose-led, cost consciousness, customer-centricity, discipline, conservatism and a constant lookout for innovation. These factors contribute to value-generative capital allocation, which stock performance tends to follow. Historical data shows that owner-operated companies outperform others by a wide margin in total stock returns.
It is not difficult to find many examples of owner mindset across our equity portfolio. A few of them have their unique missions to pursue: for instance, Singapore-based Snack Empire (HKSE:01843, Financial) brings iconic Taiwanese street snacks to foodies worldwide, from California to Indonesia; Egypt-based Integrated Diagnostics (LSE:IDHC, Financial) aims to improve the quality of health care services in the Middle East and Africa. Some, such as Jobindex (OCSE:JOBNDX, Financial) (the number one job portal in Denmark), often zig when others zag, embracing short-term headwinds for long-term gains. Others demonstrate a thrift culture - sometime to the extreme: at the Hong Kong headquarter of Plover Bay (HKSE:01523, Financial) (a global leader in high-performance wireless networking), we found no reception desk, no office decoration and even no passenger elevator (a cargo elevator is the way to go).
It is worth mentioning that an owner mindset is not the exclusive label for founders. Companies like Kakau.com (the operator of two leading internet platforms in Japan), Credit Acceptance (CACC, Financial) (U.S. subprime auto loan underwriter), Games Workshop (LSE:GAW, Financial) (the U.K.-based company behind Warhammer), although no longer seeing their founders around, still maintain a return-focused, disciplined, prudent capital-allocation approach. Evidently, the owner mindset is inheritable, and hence, could be part of the durable competitive edge that guards the long-term prosperity of the business.
This article was written by the author and first appeared in Hillside Wealth Management's monthly newsletter.
Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. I/We have position(s) in any of the securities referenced in this article.
