Liberum Research continues to see positive signs for increasing executive turnover which typically translates into growth for the economy. Just as Liberum registered in the previous month of October, November has also shown positive signs for continued executive turnover but with a few caveats. Unlike October, executive turnover totals were positive in the year to year November 2014 to the month of November 2014 comparison. The same, however, was not completely the case when Liberum compared October 2014′s executive turnover results with those of November 2014. Liberum anticipates executive turnover will continue to grow as we move into the winter and the early spring which, if true, will continue to bode well for the overall North American economies.
As for Liberum’s latest figures, all four key categories experienced increases in November 2014 over the same month of November 2013, however, Liberum registered more mixed results when November 2014′s turnover figures were compared to the totals for the previous month of October.
Liberum Comparison Breakdown of Key November Executive Turnover Figures
Below is a breakdown of Liberum’s key executive category percentage changes for November 2014 compared with November a year earlier and the previous month of October 2014.
November 2013 Compared to November 2014
For November 2014 increases in turnover occured in all four key categories. CEO changes increased 5% from November a year earlier, CFO changes increased 23%, C-level changes increased 5%, and board of director changes increased 2%.
October 2014 Compared to November 2014
The month to month changes in executive turnover, October 2014 to November 2014, however, were not nearly as positive. CEO changes saw no change, CFO changes increased 10%, while C-level changes and board of director changes declined 7% and 15% respectively.
Below are the overall turnover totals for November 2014. The information is just illustrative of how institutional investors could view executive turnover and its possible relationship with a company’s performance. Using Liberum’s database could offer a totally new perspective on investment and is a potential way to come up with unique special situation opportunities. Executive search firms on the other hand can use the information to generate new leads and new clients.
KEY CEO CHANGES – NOVEMBER 2014
35 COMPANIES WITH CEO CHANGES WORTH RE-EXAMINING
According to Liberum’s Management Change Database, a total of 212 CEO related changes occurred during November 2014. Here are 35 from the time period that caught my eye. By significant, I’m looking for situations where I think a particularly strong or weak choice has been made – given the apparent current state of the company – or where there is an interesting special situation. (Anyone using Liberum’s database could do the same kind of analysis for other key titles, e.g., CFOs, COOs, CMOs Presidents, etc.)
DATE COMPANY TICKER EXCHANGE MARKET CAP $ MILLIONS
11-03 Cesca Therapeutics Inc KOOL NASDAQ 43
11-04 Lpath Inc LPTN NASDAQ 45
11-05 Acelrx Pharmaceut ACRX NASDAQ 244
11-05 Jive Software, In JIVE NASDAQ 461
11-06 Americn Transn Hl ATHI OTC 92
11-06 Financial Engines FNGN NASDAQ 1635
11-06 Fuelstream Inc FLST OTC 64
11-06 Goldspan Resource GSPND 168
11-06 Osram Licht Ag OSAGF OTC 3668
11-10 Aaron’s, Inc. Com AAN NYSE 1883
11-10 Bsd Medical Corpo BSDM NASDAQ 18
11-12 Northstar Hlthcr NRTSF OTC 63
11-12 Unitedhealth Group, Inc. UNH NYSE 91660
11-13 Alchemia Ltd AEMAF OTC 23
11-13 Calzada Ltd CALZF OTC 31
11-13 Willis Group Holdings Limited WSH NYSE 7377
11-14 Arctic Cat, Inc. ACAT NASDAQ 432
11-14 Ashland Inc. ASH NYSE 7992
11-14 Biocorrx Inc BICX OTC 15
11-14 Carpenter Technology Corporation CRS NYSE 2742
11-17 Genuine Parts Company GPC NYSE 15307
11-17 Kennametal Inc. KMT NYSE 3205
11-17 Servicesource Int SREV NASDAQ 356
11-18 Concurrent Computer Corp CCUR NASDAQ 60
11-19 Air Industries Gr AIRI NYSE 74
11-20 First Titan Corp FTTN OTC 870
11-20 Hertz Global Holdings, Inc. HTZ NYSE 10185
11-20 Rhino Resource Pa RNO NYSE 84
11-21 Evertec, Inc. Com EVTC NYSE 1737
11-21 Intrawest Resorts SNOW NYSE 478
11-21 Sotheby’s BID NYSE 2908
11-24 Banco Santander S BCDRF OTC 108000
11-24 Infoblox Inc. Com BLOX NYSE 980
11-24 Jacobs Engineering Group Inc. JEC NYSE 6321
11-26 Highvista Gold In HVV CVE 399
NOVEMBER 2014 MANAGEMENT CHANGE STATISTICS
C-LEVEL MANAGEMENT CHANGE STATISTICS
GRAND TOTAL – 1323
TOP INDUSTRY SECTORS
– Drugs/Biotech – 158
– Banking – 76
– Energy – 72
NOVEMBER 2014 CEO CHANGE STATISTICS
GRAND TOTAL – 212
TOP INDUSTRY SECTORS
– Drugs/Biotech – 19
– Metals/Mining – 13
– Banking- 11
NOVEMBER 2014 CFO CHANGE STATISTICS
GRAND TOTAL – 210
TOP INDUSTRY SECTORS
– Drugs/Biotech – 19
– Metals/Mining – 16
– Food – 10
NOVEMBER 2014 BOARD OF DIRECTOR CHANGE STATISTICS
GRAND TOTAL – 382
TOP INDUSTRY SECTORS
– Drugs/Biotech – 56
– Energy – 28
– Banking – 21
Investors need to diligently monitor key management changes. Certain management changes should be viewed as a “special situation” that can have a direct and major impact on a company’s performance and share price.
Liberum Research, the independent research firm focused on corporate management change, has developed an online relational database designed to assist institutional investors develop special situation investment ideas related to executive management change. While special situation investing traditionally revolves around corporate restructuring, spin-offs and acquisitions, executive management changes, depending on the circumstances, can represent a short or long-term investment opportunity.
Liberum’s ten year old database offers institutional investors the ability to examine:
Johnson Controls Inc. (JCI) is shedding its auto supplier business and transitioning into the role of a diversified industrial company, in hopes of improving key metrics and tapping into a different investor population, says Edwin C. Ciskowski, Senior Vice President and Co-Portfolio Manager at Keeley Asset Management Corp.
“We own Johnson Controls,” Ciskowski said. “Ultimately, our thesis on this stock is that several years from now, when it’s finished rationalizing its OEM auto supply business, the stock could transition from being owned by and covered by auto analysts to being owned by and covered by diversified industrial analysts.”
FOR MORE INFORMATION ABOUT THIS INTERVIEW CLICK HERE.
Ciskowski says JCI is a diversified industrial with a leading commercial and residential building efficiency division, and that the OEM auto supplier business divestiture should result in improved stock pricing.
“Clearly, JCI is a company that’s in the throes of change as it’s restructuring with the hope of improving margins and returns, but if we’re right and it ultimately is viewed as a diversified industrial — rather than an auto supplier — we could also benefit from an upward revaluation as diversified industrials trade at higher valuations than auto suppliers,” Ciskowski said.
Equity Analyst Kristoffer Inton of Morningstar says that Eldorado Gold Corp (USA) (EGO) is the lowest-cost gold miner in his coverage universe, and the only gold miner he covers that has a sustainable competitive advantage.
“At Morningstar, we assign companies moat ratings based on our assessment of their long-term competitive advantages. We assign Eldorado a narrow moat rating, because we believe the company can maintain its low-cost advantage for at least 10 years given their portfolio of low-cost and long-life mines,” Inton said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Eldorado has a unique strategy to build its portfolio of low-cost mines, Inton says, in that the company pursues mining assets in less popular jurisdictions, avoiding the high prices and bidding wars of the more popular areas.
“Eldorado does face some risk having to work with countries that aren’t as familiar with the gold mining industry. However, Eldorado’s management team has shown a strong track record over the years of working with these countries and opening mines as planned. This success is what leads to assign Eldorado’s management an exemplary stewardship rating, the only exemplary stewardship rating in our gold coverage universe,” Inton said.
Senior Analyst Patrick Chidley of HSBC says Fresnillo Plc (LON:FRES) is a stock that should be the core part of any precious metals portfolio, as it is a low-cost producer set to deliver great growth.
“Fresnillo is a silver and gold producer. It’s actually the largest silver producer. It’s a very solid company with a long track record, solid management, blue-chip management, and it’s a low cost producer,” Chidley said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Chidley says that on a gold-equivalent basis, Fresnillo is one of the lowest-cost producers he covers. He also expects to see improved production numbers in the coming years.
“It’s also got great growth that it will be delivering, with a new expanded mine coming online, around about now, in fact. So we should see better production numbers coming through in 2015 and 2016, and that’s going to help it to show that it’s actually a growth business,” Chidley said.
“Beyond that it’s got one of the largest and most attractive ground positions in Mexico that we think will eventually yield many more deposits to be exploited,” Chidley added.
Senior Analyst Patrick Chidley of HSBC says one of his top picks is Randgold Resources Ltd. (ADR) (GOLD), which is in the midst of a growth phase.
“it’s a West African — or actually produces in West and Central Africa now, although is actually a European company, listed in London and on Nasdaq,” Chidley said. “It’s bringing on a major new mine, and what we see going forward, what the plan is, is for costs to keep coming down on the basis that grades will go up.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Chidley notes that when companies mine higher grades, the average cost per ounce tends to go down, so Randgold is riding a positive trend that will help them going forward.
“It’s one of the lowest-cost producers on a total-cost basis, and we think that they’ve got a solid balance sheet and one of the best management teams in the industry. So that’s one of our picks,” Chidley said.
Lauren Romeo, a portfolio manager for Royce & Associates, LLC, says MKS Instruments, Inc. (MKSI) is one of her favorite stocks at the moment. She says semiconductor technology is at an inflection point that should create a strong demand tailwind for MKS Instruments.
“In order to develop ever faster, smaller, more energy-efficient chips, new chip designs or architectures — such as FinFET, 3D NAND, advanced packaging — are being developed which in turn require new semiconductor tools,” Romeo says. “MKSI is benefiting not only from capital spending on these next-generation tools, but also because more tools per process are required given the growing complexity in advanced nodes.”
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Romeo says she also like MKS Instruments because the company has taken steps to grow sales and reduce the cyclicality of its financial results by taking the same components it sells to the semiconductor industry and diversifying into nonsemiconductor markets like medical, solar and industrial.
“Nonsemiconductor business now accounts for about one-third of MKSI’s revenue. Finally, MKSI has a clean balance sheet with no debt and more than $10 per share in cash — or more than 25% of its market cap,” Romeo says. “Historically, management has done a good job opportunistically redeploying excess cash into acquisitions that expand the product portfolio as well as via a regular dividend and timely stock repurchases.”
Portfolio Manager Dr. Kenneth Conrad says Microsoft Corporation (MSFT) is his firm’s fourth-largest holding with a 2.6% dividend yield, and is an attractive stock from a quantitative standpoint.
“Things are firing on all cylinders right now. They’ve just beat on earnings and sales,” Conrad said.
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Conrad says Microsoft is benefiting this year from a corporate PC refresh, and next year will benefit from a server refresh, in addition to other areas of growing business.
“We really like their enterprise business. Their cloud platform, Azure, is growing really fast. And we think that Office 365 is going to be a long-term positive given that subscription model. And the CEO, Nadella, seems to be making all the right moves to fix the business,” Conrad said.
Dr. Kenneth Conrad, Portfolio Manager at BMO Global Asset Management, says his firm picked up Dow Chemical Co (DOW) recently, and he likes the company because of its natural gas exposure as well as its dividend yield and buyback increases, among other positive characteristics.
“Dow Chemical is a beneficiary of the shale gas boom in the U.S., like Lyondell; it uses cheap natural gas liquids as an input for the process. They have a 3.4% yield. They just increased it 14%. They also increased their buyback by $5 billion to a total of $9.5 billion, which is 18% of their market cap,” Conrad said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Conrad says Dow Chemical beat Wall Street estimates on earnings and sales in the last quarter, and should continue to produce positive results as it moves into 2015.
“The company is doing quite well,” Conrad said. “They have been actively pruning their company to keep the best businesses, and they have some new facilities starting up in 2015 that should boost their earnings profile.”
Lauren Romeo, Portfolio Manager for Royce & Associates, says MKS Instruments, Inc. (MKSI) is one of her favorite stocks at the moment. She says semiconductor technology is at an inflection point that should create a strong demand tailwind for MKS Instruments.
“In order to develop ever faster, smaller, more energy-efficient chips, new chip designs or architectures — such as FinFET, 3D NAND, advanced packaging — are being developed which in turn require new semiconductor tools,” Romeo says. “MKSI is benefiting not only from capital spending on these next-generation tools, but also because more tools per process are required given the growing complexity in advanced nodes.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Romeo says she also like MKS Instruments because the company has taken steps to grow sales and reduce the cyclicality of its financial results by taking the same components it sells to the semiconductor industry and diversifying into non-semiconductor markets like medical, solar and industrial.
“Nonsemiconductor business now accounts for about one-third of MKSI’s revenue. Finally, MKSI has a clean balance sheet with no debt and more than $10 per share in cash — or more than 25% of its market cap,” Romeo says. “Historically, management has done a good job opportunistically redeploying excess cash into acquisitions that expand the product portfolio as well as via a regular dividend and timely stock repurchases.”
Lauren Romeo, Portfolio Manager for Royce & Associates, says CIRCOR International, Inc. (CIR) CEO Scott Buckhout has developed and launched a plan to unlock the company’s true growth and profitability potential. Under Buckhout’s leadership, CIR has set the following targets for 2018: 4% to 6% compound annual organic sales growth; a roughly 500 basis point improvement in operating margin to about 15%; compound annual EPS growth of 15%; and free cash flow conversion of greater than 100%.
“He’s also brought on additional management talent to help CIR achieve these goals,” Romeo says. “The team is already making inroads, simplifying CIR’s corporate structure, beginning to rationalize plants and its supplier base, exiting unprofitable product lines, and implementing a continuous productivity improvement program called CIRCOR Business System.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Romeo says CIR is likely to supplement its internal growth by redeploying its improved free cash flow into strategic acquisitions that expand or enhance its product set.
“Initiatives underway to drive growth include accelerating new product development, increasing CIR’s presence in high-growth geographies where it is under-represented, and cross-selling products into new, relevant end markets,” Romeo says.
