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More than anything else, managers determine returns. They set strategy, hire key team members, oversee operations, and cash paychecks. Every move they make either enhances or destroys shareholder capital.
It pays to know who these men and women are, how they're paid, whether they, too, are owners, and how they perform versus competitors in certain key metrics. In this regular column, I'll examine all that and more with the goal of enhancing our understanding of some of the top stocks in Fooldom.
Next up: Google (Nasdaq: GOOG ) . Is the executive team of the cloud computing king doing all it can to earn you outsized returns?
|CAPS stars (out of 5)||***|
|Bullish pitches||2,386 out of 3,076|
|Highest rated peers||Spark Networks, PhotoChannel Networks, Chordiant Software|
Data current as of March 14.
Google is getting more competitive by the day. Not only is Android gaining ground with adoption in smartphones and tablets, but also the company is investing to beat its newest and perhaps most dangerous rival, Facebook.
Over the weekend, reports surfaced that the company's long-awaited social network would debut at the annual South by Southwest conference in Austin, Texas. The rumor was soon squelched, but no one denies that a social network called Circles is in development.
We've known for a while that social media and social search are areas of interest for Google, and for good reason. Facebook has attracted major advertisers to its platform and produced $487 million in profit last year.
We're talking about more than just banner ads here. A partnership with Time Warner (NYSE: TWX ) will bring rentable movies to some of its brand-specific pages on the social network, beginning with 2008's The Dark Knight. You can bet Google would love nothing more than to strike similar deals through YouTube.
Either way, the good news for investors is that Google remains a young company in the important, emerging industry of delivering computing services via the cloud. We don't yet know what's possible when browsers get slicker, broadband gets more prevalent, and Web-based programming interfaces get standardized. All we know is that The Big G is positioned to profit from the shift.
"Profits continue to beat analyst expectations, and the company remains a strong growth firm, consistently acquiring smaller companies, focusing in on cloud computing technologies. Strong stock, great time to get in," Foolish investor becurran wrote yesterday.
|Eric Schmidt, chairman||10||$1,661||9,149,564|
|Larry Page, co-founder and CEO||13||$1,730||27,720,272|
|Sergey Brin, co-founder and president, technology||13||$1,661||27,126,186|
|Patrick Pichette, chief financial officer||3||$2,974,038||17,069|
Source: Capital IQ, a division of Standard & Poor's. (Data current as of March 14.) * Includes 9,144,574 class B shares for Schmidt, 27,126,186 class B shares for Brin, and 27,605,272 class B shares for Page.
I have mixed feelings about Google's executive team. Co-founder Larry Page, while no doubt a tech visionary, has yet to prove himself as CEO of a global organization employing more than 24,000 people worldwide.
The Big G has also repriced options in 2009, a huge no-no for me as a Foolish investor but an economic reality for tech companies operating in the options-soaked economy we call Silicon Valley. The move, which was originally estimated to cost shareholders $460 million in lost equity, resulted in a $1.5 billion windfall for employees.
On the other hand, there's no doubting the passion that Schmidt, Page, and Brin have for the business. Many employees share their fervor. For years, Google has ranked among the top five best places to work by Fortune magazine. Why does this matter? Happy employees are always going to be more likely to be productive.
Management analysis versus competitors
|Apple (Nasdaq: AAPL )||0.70%||38.8%||19.1%||36.8%|
|Microsoft (Nasdaq: MSFT )||4.04%||79.2%||19.3%||44.3%|
|Yahoo! (Nasdaq: YHOO )||9.39%||58.5%||3.5%||9.8%|
Source: Capital IQ, a division of Standard & Poor's. (Data current as of March 14.)
* Return on assets
** Return on equity
Interestingly, happiness doesn't translate into outperformance when compared to Google's two highest-profile competitors: Apple and Microsoft, both of which boast higher returns on assets and equity.
And yet I like Google at these levels. At 17 times projected earnings, the stock trades for less than the long-term earnings growth rate analysts expect. That's a good sign; analysts tend to be too conservative in estimating The Big G's profit potential. My advice is to buy this Core Stock if you don't yet own it.
Do you agree? Disagree? Let us know what you think about Google's strategy, management, and competitive positioning using the comments box below. You can also rate Google in Motley Fool CAPS.
Finally, don't forget to keep tabs on Google by adding the stock to the My Watchlist tool, our free, personalized stock tracking service.