The Australian strategy delivered a return of 8.2% in the month of June, above the benchmark return (2.6%). The monthly performance of the strategy’s largest positions in were as follows: Reece (15.3%), Fortescue Metals (4.0%), Afterpay (27.4%), Wisetch Global (13.1%) and Megaport (23.0%). For the 2021 financial year, the strategy produced a return of 49.6%, above the benchmark return (30.2%). The global strategy earned a return of 5.1% (AUD) for the month, above the benchmark return (4.7%). The strategy’s largest positions remain MarketAxess, DR Horton, Fraser Group, Masimo Corporation, Starbucks and Microsoft. For the 2021 financial year, the strategy produced a return of 30.6%, above the benchmark return (27.5%).
To test the robustness and persistence of founders’ performance, we have gone back over the past fifteen years to compare the attributes of All Ords listed founder-CEO stocks (216) versus those managed by professionally hired CEOs (1,042). Our analysis includes non-survivors such as ABC Learning Centres, so we are not simply cherry picking the better performing founder companies. The table below reports means and medians for the two groups across firm characteristics, valuation and performance, and risk taking attributes. The summary statistics show that founder-CEO firms are smaller and younger, trade on higher multiples (Tobin’s q), exhibit higher ROAs and higher dividend payout ratios.
One interpretation is that the superior performance of founder firms reflects a greater propensity to take on risk. On the contrary, founder companies have more conservative balance sheets, reflected in lower balance sheet risk measures; they maintain larger cash balances, exhibit lower gearing and have lower capital expenditures. The median estimates also point to strong returns on capital coupled with low balance sheet risk, suggesting that the key theme of founder firms’ superior performance is not being skewed by a small number of outliers.
