Good CEOs versus Bad CEOs
Stockerblog.com had the pleasure of recently interviewing Ken Fisher, head of the $45 billion Fisher Asset Management, a very long time Forbes columnist, and author of the books Super Stocks, The Wall Street Waltz, 100 Minds That Made the Market, and The Only Three Questions That Count: Investing by Knowing What Others Don't.
He is also coming out with a new book in the Fall, The Ten Roads to Riches: The Way the Wealthy Got There (And How You Can Too!), published by Wiley.
If you missed Part 1 of the interview, you can see it here, and if you missed Part 2, you can see it here. Also check out Part 3 and Part 4.
Stockerblog.com: Your second question covered in the book, ' What can I fathom that others can’t?', is that something you can do on a micro level, in other words down to the stock as opposed to the sector or the industry or the economy as a whole?
Fisher: Yes. It's easier to make the questions work in a marketing sense for a book when they're more macro-ish, because we can talk about something that everyone can think about. The deficit. The price of oil. Those are the things that everybody has some ability to get on the page with. When you start talking about a single stock, it's harder to get everyone on the page, so it doesn't work as well for demonstration purposes in the book. But absolutely, its absolutely true that it could be either a macro point that relates to single stock or a micro point that relates to a single stock.
A micro point that relates to a single stock, it is a huge one, it is such an easy no brainer is that most people get it but they don't get it. Here's this guy, he just gone to go run this small cap company, and I know he's an idiot. Short the stock. Or I know he's the greatest thing since sliced bread. I'm going to own the stock heavy. I know he's the greatest guy since sliced bread, and everybody else doesn't. I've found out something other people don't know. They think he's an idiot, I know he's great. Make sure you're right.
If you can figure out lousy CEOs, that's a big one. Of course, that takes you on the short side. I mean, I can think of a company right now where they just announced the new CEO and I know the guy is just a dodo, and it's a perfectly phenomenal short opportunity, since the guy couldn't manage his way out of a paper bag. That's knowing something other people don't know.
Why would they put him in if he's lousy, well, the answer is that happens all the time. He interviews well. The board interviews him, he interviews well, half of getting the job is interviewing well.
I've got a new book coming out in late October, and it has a whole chapter on how to be a replacement CEO.
Stockerblog.com: What is the book called?
Fisher: The book is called the Ten Roads to Riches. It's the ten different ways people get mega-wealthy, and one of them is to be a replacement CEO. One of the things I talk about is how to become a replacement CEO, and a lot of firms hire replacement CEOs really badly, because the basic process that they use is, we hire a search firm, the search firm looks at candidates, we the board are told that pretty much any of them would be OK, yet we are always going to be skeptical of that, then we interview and then we seek some references. So we're going to get good references, since nobody is going to come forward that doesn't have good references and the real driving feature is who interviews well.
But interviewing well is a completely different skill than being a CEO. So you get a lot of people who become CEOs and move from job to job to job every three or four years, often to bigger more impressive places and they are really good corporate politicians and they are really good interviewers and they can't manage their way out and they can't strategize their way out of anything, and yet that doesn't stop them from getting hired. Its kind of a weakness in our society but there's not a better way to do it. Yet all the time, CEOs get elected who are just not very good, because they interview well. They're nice guys; they're not just great CEO's. They're not Jack Welch; they're not whoever you want to think of as a great CEO.
End of Part 6 of the Interview – Stay tuned for the next segment of the interview in the next several days, where Fisher discusses favorable sectors and much more.
Fisher obviously didn't provide any stock recommendations for the interview, but many of the stocks he has favored in the past can be found in his previous Forbes columns. For example, Banco Bilbao Vizcaya Argentaria (BBV), Enersis (ENI), Franklin Resources (BEN), and Anglo American (AAUK).
His book, <The Only Three Questions That Count: Investing by Knowing What Others Don't, which would make a great gift for any investor, is available at Amazon.
Author does not own any of the above mentioned stocks.
Interview by Fred Fuld at Stockerblog.com