Management Turnover as Change Agent

Friday, March 30, 2007

North American Scientific, Inc. - and the new guy hasn't even started yet.

This is a new event from last week. The former CEO had stepped down in November last year - to become EVP and Chief Technology Officer! In other words, a thinker not necessarily a leader. Took them four months of searching to name a new CEO - John Rush. Decent resume - 24 years experience, strong sales background, been a CEO before of a public company.

In short - a messy situation brought to some resolution - and the market responded promptly, but not so promptly that an early investor couldn't participate in the gain.

Phoenix Technologies - 6 months on

Phoenix Technologies (PTEC) – Market Cap - $128 million. Not a big company. The story here is that in May 2006, Albert E. Sisco resigned as chairman, president & CEO effective immediately. Not a great sign. Then on Woodson Hobbs joined as new CEO, President & Director on Spetember 7, 2006.

Note the price chart - which is not untypical. The price went south for a while - but moving into 2007, the market started to appreciate that the change in top person was beginning to have an impact. The stock price gain since the change was announce is about 25% - even after the early dip.

Wednesday, March 28, 2007

A blog about management change

This is the first edition of my new blog. The premise behind the blog is that management is a key factor in a company’s ability to perform and thrive both short and long-term. Top management changes can have a significant impact on a company’s shareholder value. Obviously, there are many other factors of importance in determining a company’s performance besides management.

To help readers get a better understanding of why investors should make an effort to follow management changes, I'm going to review a few stocks I originally picked back in September and November. For each of these firms, I recommended investors review the firms due to the key CEO changes they experienced at the time. Decide for yourself the validity behind monitoring management changes.

September 2006

9/8/06 – DPL, Inc. (DPL) - Market Cap - $3.124 billion
(4/3/06 James V. Mahoney after 31 years resigned as president, CEO & director)
Paul M. Barbas joined as new CEO, president & director
9/8/06 Closing stock price - $27.22
3/26/07 Closing stock price - $31.07
% Change - +14%

9/26/06 – Par Pharmaceuticals (PRX) – Market Cap - $649 million
(Scott Tarriff stepped down as executive chairman and as president & CEO)
Patrick G.LaPore – Appointed immediately president & CEO.
9/26/07 Closing stock price - $18.80
3/26/07 Closing stock price - $24.19
% Change - +29%

November 2006

11/8/06 – Owens Illinois (OI) – Market Cap - $2.967 billion
(11/8/06 Steve McCracken stepped down at the end of the month for personal reasons he underwent major surgery a few months back)
Albert P.L. Stroucken joined as new chairman & CEO (current board member)
11/8/07 Closing stock price - $17.57
3/26/07 Closing stock price - $25.74
% Change - +46%

11/16/06 – LoJack Corporation (LOJN) – Market Cap - $282 million
(Joseph F. Abely resigned as CEO & Director)
Richard T. Riley was promoted from president & COO to CEO and chairman
11/8/07 Closing stock price - $17.57
3/26/07 Closing stock price - $25.74
% Change - +22%

All five companies above managed to hire or promote an exceptionally outstanding group of executives to fill the vacant CEO posts. Each candidate when examined in relation to operational, management and financial skills seemed to meet the appropriate requirements for the positions and have so far met or exceeded those expectations.

The key when attempting to determine the practicality and viability of new CEO appointees is to determine what their specific skill sets are and how they might fit into a company’s financial and business circumstances at the time and in the future. Compatibility, strategic approach all play into the analysis.

For more information on the companies originally selected for further consideration back in September and November or to start your own or your firm’s monitoring of corporate management change contact us at Liberum Research or go to our website and click on Free Trial. Just as an aside, a number of the companies selected in September and November were chosen due to weak nature of the specific CEO appointments.