Perhaps it's those pesky problems in Europe, including Greece's weekly tumble and the changing of the guard in France, along with the economic slowdown in China. Or maybe it's once-iconic leaders at JP Morgan (NYSE: JPM) and Chesapeake Energy (NYSE: CHK) suddenly having to play defense.
For whatever reason, our skittish market appears to be dictating that we ratchet up the importance of managerial quality in selecting investments, perhaps placing that consideration second only to the staying power of demand for a company's goods or services. The trouble with making management a more important tool in your kit, however, involves its resistance to quantification. But while investors and their analyst "guides" prefer metrics, it's possible to gain some confidence that the folks at the helm of the companies to which you commit your funds have a steady hand on the tiller.
Let's take a look at three natural-resources companies that allow me to sleep at night, knowing that their leaders are unlikely to head off half-cocked, place shareholders' interests behind their own, or ignore malfeasance in the ranks beneath them. I suggest that you think about these companies and then, at the very least, add them to the Fool's My Watchlist:
1. Freeport-McMoRan Copper & Gold (NYSE: FCX)
If you're looking for companies whose products won't go the way of buggy whips, that are operationally and financially sound, and whose managements have evidenced decision-making prudence, it's tough to top Freeport-McMoRan Copper and Gold. The Phoenix-based company sits atop long-lived, geographically diverse reserves of copper, gold, and molybdenum. Following labor strife at its giant Grasberg copper and gold mine in Indonesia, production levels are returning to normal. Further, Grasberg, along with operations in the Americas and the Democratic Republic of Congo, is being expanded.
Freeport's management team, led by CEO Richard Adkerson, has demonstrated an important ability to get on effectively with the unpredictable governments of Indonesia and the Democratic Republic of Congo. It has also effectively nurtured the balance sheet. Debt reached more than $17.5 billion five years ago, when the company bought its far larger competitor, Phelps Dodge. Today Freeport is net debt free.
Adkerson holds accounting and MBA degrees from Mississippi State University. He joined Freeport in 1989 after rising to partner and head of the important worldwide oil and gas industry practice.
Add Freeport-McMoran to My Watchlist.
2. Schlumberger (NYSE: SLB)
Schlumberger, far and away the largest of the oil-field service companies, roams the world with 110,000 employees in about 80 countries, aiding international oil companies, national oil companies, and independent producers in the search for and production of oil and gas. As technology becomes more vital to the production of hydrocarbons -- whether in deepwater venues or in the expanding world of unconventional production -- so too does the company's role in the industry.
Indeed, last year Schlumberger spent more than a billion research-and-development dollars in its ongoing quest to perfect new oil and gas technologies. The company's research efforts are spreading among 25 locations worldwide.
Norway native Paal Kibsgaard followed in the footsteps of the capable Andrew Gould when he was named CEO of Schlumberger in 2011. The prior year, after serving as president of the company's reservoir characterization production group, he'd been named Schlumberger's chief operating officer. The holder of a graduate degree in petroleum engineering from Norwegian University of Science and Technology, he joined Schlumberger in 1997.
Add Schlumberger to My Watchlist.
3. Chevron (NYSE: CVX)
Chevron, which now includes such former companies as Gulf Oil and Texaco, is the second-largest U.S.-based major. The company is active in a host of global exploration and production operations, including those in the U.S., the Gulf of Mexico, Kazakhstan, Angola, Nigeria, Canada, and Saudi Arabia. In Western Australia, the company is the major domo on the huge Gorgon and Wheatstone LNG projects.
Importantly, big oil has faced a steady stream of criticism for being under-taxed. Its rates should be increased in favor of "green energy," goes the all-too-frequent argument. That's a tough contention to swallow, as Chevron paid taxes at an effective rate well above 40% last year, while serving as both the world's largest producer of geothermal energy and a successful solar developer.
Beyond that, the company is demonstrating potential for synergies between oil and solar, with an enhanced oil recovery project that uses the latter to increase oil production without expanding carbon footprints. Nevertheless, there's no evidence that Chevron has received anything approaching Solyndra-type funding from taxpayers.
Nearly three years ago, John Watson replaced David O'Reilly as Chevron's CEO. Watson joined Chevron in 1980 and rose primarily through the finance ranks. In later positions, he headed Chevron Canada, directed planning and mergers and acquisitions, and oversaw the integration of Texaco into Chevron. Still later, he became the company's CFO and then oversaw North American exploration and production.
Add Chevron to My Watchlist.
The Foolish bottom line
There are clearly other companies that fit the sound management bill. But these three are among my favorites. Watch them closely as the market jumps and drops.
