10 blue chip management teams in the ASX200

Buy Hold Sell

Livewire Markets

In challenging times, the quality of management is paramount to ensure that shareholders capital is well looked after, and companies can survive the battles. Solid fundamentals don't count for much if strategy can't be executed effectively and ethically. Lest we forget the Hayne Royal Commission into the banking sector.  

But what are the common traits of good management teams and where are some examples of the best in the business?

In this episode we're joined by Anthony Aboud from Perpetual and Sean Fenton from Sage Capital - two fund managers who regularly meet with the top brass of our largest companies in the ASX. 

They map out the key things they look for in a management team so you can identify them yourself, before nominating their favourite management teams (and outline why) across financials, materials, retail, healthcare and technology. 

Note: This episode was filmed on Wednesday 8 June 2022. You can watch, listen or read an edited transcript below. 

  

Edited transcript

David Thornton: Hello and welcome to Buy Hold Sell. I'm your host, David Thornton. In challenging times, the quality of management teams are essential in order to preserve shareholder capital. But what makes a good management team? For that, we're joined by two fund managers who regularly meet up with some of the top management teams on the ASX. Anthony Aboud from Perpetual, and Sean Fenton from Sage Capital. 

Management checklist

Anthony Aboud: We generally like businesses which are founder lead. If not, they've got that principle-type mentality, rather than agency-type mentality. Management teams who walk the floor, understand their business extremely well. Management teams which look for long term strategies rather than be short term, trying to get earnings guidance for the next six months. So, looking for that long term. 

We like management teams who are operationally aggressive, but financially conservative. And management teams who can really articulate their business strategy.

David Thornton: And how about you, Sean?

Sean Fenton: I think, if I had to sum it up, I'd say alignment and experience. So, we really look for the right incentive structures for management. We want to make sure... we think people's behavior's really determined by how they're incentivized. So, but long term, short term incentives, but equity ownership in the business. You want to make sure management's aligned with the investors.

Sean Fenton: And we look for deep experience, understanding, knowledge within the industries, the sectors that they're operating in. So you want to know that your management team is actually adding value and really understands the industry structure, or the clients, or what matters, their own organisations.

And I'd say, lastly, probably a positive relationship with the board. 

So, board structure and governance is also an essential part of that overall management team. There's appropriate controls, and checks, and balances there, and also the right alignment, and a good positive relationship between those two aspects.

David Thornton: We're going to put theory into practise and ask each of our guests, now, to name one management company they're very fond of, in one of five different sectors. Let's start off with financials. It's been in focus since the Royal Commission, that's for sure. Sean, what's the team in the financial sector you like?

Financials top pick - Computershares 

Sean Fenton : Yeah, we take a pretty broad view of financial, so we include stocks like Computershares (ASX: CPU). So, yeah. Stuart Irving's been running that business for quite a long time now, and I think has done a great job in terms of managing it, in terms of growth and efficiency, through a tough period where cash rates were falling and taking a big earning slice away from them. Getting costs down. Hedging some of that. But also growing and taking opportunities that presented themselves. So, buying the Wells Fargo business through the COVID shutdown at a great price. Really increasing their cash balances, and giving them some great leverage to what we're seeing now, rising cash rates, the ability to grow investment returns through there. So, done a great job over a long period of time.

Financials top pick -Liberty Financial

Anthony Aboud: Liberty Financial (ASX: LFG). So, it's James Boyle and Sherman Ma. As you can see, it's a founder led business. They're a company which, one of the few non-bank financial institutions, which have survived through the GFC, and thrived ever since. They've built their business consistently over a couple of decades. And, yeah. They've got a clearly articulated strategy of looking to find business where the banks are pulling away from. So, yeah. That, we think, they're a good management team.

David Thornton: Excellent. Okay. Next sector, materials. Sean, they're looking pretty good at the moment, but of course they've got to also perform when things aren't so crash hot. What do you look for? Or what's a management team you're fond of in the material sector?

Materials top pick - Santos

Sean Fenton: I think a company that's done well, yeah, not just in the current good times, but through the tough times as well. So, I think Kevin Gallagher at Santos (ASX: STO) has done a great job. He turned up. The company was a bit of a bust. Case was over-geared, had to really sort that out. He came and did a good job operationally, in terms of getting the Cooper Basin up and running, producing well. Getting the real efficiency out of their investment, really focusing on return and capital. Getting the company de-geared and in a strong position where it's now able to capitalise on increasing gas prices, and really reap the benefits to shareholders.

David Thornton: Anthony. Materials?

Materials top pick - Illka Resources 

Anthony Aboud: Yeah, Tom O'Leary from Iluka (ASX: ILU). Probably not one which people would mention first up, but we think they're under promise, and over deliver. We feel that they've done some really good things as a management team, including the de merger of Deterra, which we think has been value creative. We also think that the deal they've done with the government to get the billion dollar, non-recourse loan for their rare earths refinery is something which is very complicated to do, but it's been a really good outcome for shareholders.

And, yeah. It's quite unusual in the resources sector to have someone who's not flamboyant, and not a big talker. They're definitely not big talkers. They're almost the opposite, but we think they're a good management team.

David Thornton: What about healthcare? A lot of retail investors are, I think, more interested in healthcare since the COVID pandemic.

Anthony, what's a team you like in that space?

Healthcare top pick - Sonic Healthcare 

Anthony Aboud: Look, I mean, I think you can't go past someone who's built up a business from a very small business to be a global leader, and that's Colin Goldschmidt from Sonic Healthcare (ASX: SHL). He's been CEO for 30 years, or just under 30 years. And built it from a very small business, to now being almost a 20 billion dollar global leader in pathology. So, I've got a lot of respect for that team. And they're managed down through organically, and inorganically. And one thing they managed to do is to be able to put their culture, to keep the culture of the acquired companies, and be able to continue to grow to what is a very good business.

David Thornton: Sean. Healthcare. What's the team you like in that space?

Healthcare top pick - CSL (ASX: CSL)

Sean Fenton: Healthcare is really tough, in the sense that there's actually a whole bunch of really great Australian companies that have been very successful in healthcare. But it's hard to go past the biggest one, CSL (ASX: CSL), who have grown, exceptionally, in their area. Through also a combination of just excellent operational execution, performance, combined with some great strategic decisions, in terms of buying [inaudible 00:06:39] Behring over the years, to getting into Seqirus with flu vaccines, an internal R&D portfolio. So, they've gone beyond just their IVIG and haemophilia products, to a whole range of niche products, and a lot of value add there as well. And they continue to do that. Continue to reinvest, grow their market. Yeah. Their recent acquisition hasn't completed, Vifor, I think, will also prove to be quite an effective one. So, yeah. Really hard to go past them.

David Thornton: Okay. Retail. Maybe under a bit of pressure at the moment, with Consumer Discretionary on the nose. What's the team you like in that space?

Retail top pick - JB Hi-Fi

Sean Fenton: I think for track record execution, you've probably got to go with JB Hi-Fi (ASX: JBH). So Terry Smart, then Richard Murray, and back to Terry Smart again, along the way there. So they've executed through a few cycles, through the GFC. Grown themselves. Reinvented themselves. Everyone said they were going to die when CDs and DVDs disappeared, but they found new categories. Moved into consumer goods.

Richard's moved off to Premier now, doing a good job there as well. They've also got a good management team. But I think it's going to be really interesting in the next couple of years to see if they can continue executing through what's going to be a very challenging consumer environment.

Retail top pick - Premier Investments 

Anthony Aboud: Sean partially stole my thunder there. I'm going to say Premier. I think Solomon Lew and Richard Murray are, I believe, a very good management team at Premier Investments (ASX: PMV). Again, it is a founder led company, something which we look for in a management team. We feel that during COVID, they put the company in a stronger position than after. I'd hate to be one of their landlords, but they've actually renegotiated their rents permanently lower, and executed online profitably. And so we think that, again, they're operationally aggressive, but have got a very, very strong balance sheet, so they can execute when things are getting tough. So we rate them as a top management team.

David Thornton: Okay. Finally, technology. A lot of technology companies have a different style of management.

Tech top pick - Afterpay

Anthony Aboud: Skivvies and ping pong tables, that sort of thing. Yeah. No, no. Look, look. It is probably a bit cautious. It may be a bit late to the punch here, but I think Nick Molnar and Anthony Eisen probably, yeah, top of the pops for me, for a few reasons. One, they took a very simple concept and took it global, and were the best of breed globally. And they executed excellently on winning retailers, on also lobbying, as well. But we feel that they've done a very good job.

But most important thing in technology is knowing when to sell. And they sold, if not at the top, just close to the top, because technology's fast moving. Most of the entrepreneurs need to sell at some point. And I think they sold at the right time.

David Thornton: Absolutely did. Sean. A tech management company. What have you got?

Tech top pick - WiseTech Global 

Sean Fenton: I think Richard White at WiseTech Global (ASX: WTC) has built a great business. Anthony would love him. A founder led business. He's still got a very big equity share, and it's also strongly aligned. Works very hard, right down to the nitty gritty, to the company. So he's very involved day to day in managing that. And, I think, importantly, is just executed in terms of a logistics tech company, going global with a huge array of acquisitions and focusing on what's important. Getting the subscribers in there. Consolidating tech where he needs to. And managing that's been quite complex, and they've executed very well.

David Thornton: That's it for today's episode. If you enjoyed what you saw, be sure to subscribe to our YouTube channel, where we're adding new great content every day.


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