The skills of a new CEO can sometimes be underrated when viewing a stock, especially from a technical analysis perspective
That’s why we utilize both technical and fundamental processes when evaluating potential buy or sell candidates at ValueTrend. I’ve often noted, for example, that a company who’s stock is experiencing a breakout from a consolidation pattern must have a strong enough catalyst to drive the stock through and beyond that zone. A new CEO with a new vision and an eye on accountability to his or her shareholders can be that catalyst. Examples of such breakouts with new management in place to back the breakout include CP Rail a couple of years ago, and Microsoft (disclaimer: we hold a position in MSFT). CP Rail, through Bill Ackman’s aggressive strategies to replace the old board brought retired CNR superstar Hunter Harrison on board. Mr Harrison is fully aware of his accountability to his shareholders. As he has done in the past, he fought an unproductive work atmosphere and turned the ship around. The chart shows us the base, then breakout, all on the rumour then finalization of Mr. Harrison’s new role in CP rail.
We think Microsoft’s new CEO, Satya Nadella, is an equally qualified leader at Microsoft, although his challenges focus more on the companies need for new innovation. Bill Gate’s, founder of the company, is also back on board to work alongside with Mr. Nadella. As with CP Rail, MSFT’s accountability by leadership should be rewarded. The chart is showing us that the stock market is lovin’ the changes – check that breakout on the news of Mr. Nadella’s new role as CEO of this great company. Once again, technical and fundamentals are working in sync. Readers of this blog will note that I’ve mentioned MSFT as a breakout candidate in the past. We hold positions in the stock here at ValueTrend. We view this stock as a possible double in a few years.
Accountability isn’t always present in the investment management business. We interviewed a prospective client last week who noted that ValueTrend is amongst the only Portfolio Managers he’d come across (he had reviewed several in his quest to switch from his current manager) who publically track performance on their website. You can view our performance, posted monthly at (www.valuetrend.ca). He was also impressed by our willingness to have an independent auditor survey our clients for their satisfaction in a variety of categories last year, and again post the results on our website.
This couple has been dealing with a well know TV personality, technical analyst and portfolio manager with very discouraging results. The clients ongoing questions regarding his poor 4-year track record were not dealt with in a satisfactory way. Don’t get me wrong – Any CEO or Portfolio Manager will always have a bad year or make a poor investment decision on occasion. I personally had one of my worst years in 2012, when I underperformed North American indices due to some overly defensive hedging strategies – just before the markets took off that summer. I was concerned about a potential default situation in some of the European markets, and about the potential for a standstill surrounding the Fed’s QE decision – so I made our equity platform “market neutral” – comment below if you wish to know how this works. We all now know that the IMF came to Europe’s recue, and Ben Bernanke came to ours. After my poor preforming summer, I jumped back on the market train, bought top performing sectors, and managed to make up for my lousy year. Like any good CEO, it is not the errors one makes, but the decisions made to rectify the problems of a bad year that separates the pros from the amateurs.
However, a consistently underperforming CEO or Portfolio Manager who survives merely on boardroom connections, fast talking explanations or a strong media presence (BS Baffles Brains, as is said) must be held accountable. The same goes for politicians who abuse taxpayers or break the law (unfortunately, this does not always happen, as Ontario recently experienced).
Accountability is one of the reasons I post this blog. Right or wrong, I want you to be able to quantify the technical observations I have made on this blogsite by allowing you to revisit my past entries. And good years or bad, I will continue to post the ValueTrend equity model performance on our corporate website for full accountability. I will also continue to post client satisfaction surveys for anyone on the internet to view, and I will continue to offer full comparative performance reporting sent quarterly to our clients to fully disclose our client’s comparative performance to the North American Indices. In this way, I remain fully accountable to the readers of my blog and my clients.
Biotech back in vogue?
A budding technical analyst friend of mine posts a regular blog – today’s entry on biotech was a worthy read. Check it out at http://thetechnicalroom.com/bios-back/