This little-known founder now has a $1.4 billion stake in his ASX tech company

You've probably never heard of Tony Walls, but he's quietly joined the billionaire club as the founder of software provider Objective Corp (ASX: OCL). 

This morning Walls even added $210 million to his net worth as investors cheered his company's profit report to send shares 17% higher to a record $22.45

In total, Objective Corp's under-the-radar success makes Walls' 62 million shares now worth $1.4 billion from a total market-cap of $2.2 billion. 

The business sells software-as-a-service to government clients and has a strong track record of long-term growth, so let's unpack some lessons Objective Corp gives retail investors on making money in the stock market today. 

How retail punters can get a jump on the market

The obvious point to note is that profitable founder-led businesses in the software space are often wealth makers. Technology One (ASX: TNE), Xero (ASX: XRO), WiseTech (ASX: WTC) and Pro Medicus (ASX: PME) are good examples of this. 

At Objective Corp, Walls still owns around 65% of the business and has not been selling. This should give you a big hint he thinks the business can keep growing. 

The fact he owns so much of the business, also means the stock is not that liquid versus its market cap. 

It also means a lot of powerful institutional investors cannot own it, for now. 

And it also means it's less likely to attract positive sell-side research coverage from big broking houses or investment banks. 

Finally, it also means it cannot join certain share market indices as the free float of shares on issue is too limited. In turn, this means Objective Corp cannot attract the tailwind of passive index-tracking funds buying shares. 

So is all this a negative or positive for the stock? 

I'd suggest it's a positive and shows why small retail investors can use these factors to their advantage. 

For example, many fund managers may not be interested in it now, but could be in the future if the company keeps growing and Walls eventually sells down. 

Sell side coverage and price targets

The lack of sell-side or "broker" coverage also shows this company's share price rise is based on earnings growth, rather than sentiment, wishful thinking, popularity, or goosing in the media. 

For example, many retail investors will buy a stock if they see in the media that a big, prestigious investment bank or broker says the stock is a "buy" with a 12-month price target 20% higher than today's share price.  

The price target and buy rating are giving the retail investor an illusion of certainty and confidence to buy the stock

After all, if Goldman Sachs (or similar) says it's a buy, it must be a buy, right? Wrong. As all the sell side brokers' price targets and forecasts are guesses about a future that's impossible to predict. (Sell side research may still have some good informational value for investors and often be right, but this article cannot get into that.)

So, arguably Objective Corp's lack of sell-side fans is a positive, as it's rising under the radar without being popular. 

However, if it does attract sell-side coverage in the future, I suspect it will be positive and give the shares a further boost. 

Now, if Walls does ever sell a lot of his $1.4 billion stake that will also open up the business to potential index inclusion and the tailwind of passive buying. 

If he doesn't sell, as a fellow shareholder you can be confident the boss and founder has a lot of skin in the game and is logically confident about the future. 

Management is extremely important!

Walls is the founder at Objective Corp and often you'll hear professional investors talk about the importance of "good management" when making decisions where to allocate capital. However, management is quite an intangible quality for small investors to get a read on. 

In particular, this is because they don't have the big advantage of access to management teams that professional investors do. 

So, from my point of view, if you see a successful founder they're far more likely to fall into the "good management" bucket, than a career CEO who has climbed the corporate ladder and is hard to get a read on. 

Different investors, will place different levels of emphasis on qualitative and quantitative factors when picking stocks. 

Personally, I place a heavy emphasis on management and founder-led businesses. That's me, others though may place more emphasis on valuation, or dividends for example.  

For full disclosure I do own a small parcel of shares in Objective Corp and have no intention of selling them. The idea was brought to me by small-cap stock picking expert Claude Walker of A Rich Life. So, I probably owe Claude a glass of bubbly!

Also, please note this article is not to encourage anyone to buy Objective Corp shares, as there's a clear risk of capital losses as well. So, please do your own research and take this for educational purposes only.