Do Outsider CEOs Have an Advantage Among Technology Stocks?

James Dennin, Kapitall: After our screen on stocks with attractive CEOs, we considered stock performance by looking for outsider CEOs. 

One of Warren Buffett's favorite books (from his reading list for 2012) is The Outsiders : 8 Unconventional CEOs and Their Radically Rational Blueprint for Success. The book is an in-depth look (there's a great summary here) at the exemplary performance of eight CEOs who yielded incredibly high returns while also sharing a few noteworthy characteristics that made them unusual compared to their peers.

A lot of them aren't particularly surprising. They focus more on value per share than growth overall. They are careful allocaters of capital. They are thoughtful introverts when many CEOs are typically more charismatic.

But one common theme that's more surprising than the rest is a lack of management experience. Whether this helps them think outside of the box, or helps them be more detached in how they restructure the company, all eight of the exemplary "outsiders" in the group had very little experience leading other people. 

Investing ideas

With that in mind, we built this list of stocks starting with the top 20 companies of Glassdoor's database of CEO approval ratings. Then we narrowed the list by focusing only on companies that had a CEO with fewer than five years of management experience. 

This was tricky to do, because not every CEO has a biography that's easy to verify on the internet. But all six of the CEOs on this list either founded their company at a very young age; or proceeded incredibly rapidly though ranks. The first thing you'll notice is that almost all the companies left on our list are technology stocks. 

Click on the interactive chart below to view analyst ratings over time. 

Do you see investing opportunities based on CEO approval ratings? Use the list below to begin your own analysis. 

1. Cognizant Technology Solutions Corporation ( CTSH): Provides information technology consulting and technology services in North America, Europe, and Asia. Market cap at $29.76B, most recent closing price at $99.34.

CEO Frank D’Souza is one of the youngest CEOs in software. He took over the company he helped found at age 37. Though he was promoted from within, D'Souza's fast rise through the industry meant he had only a few years of management experience before taking on Cognizant's top role. He has a 96% approval rating. 
 

 

2. Facebook, Inc. ( FB): Operates as an integrated social networking company worldwide. Market cap at $142.21, most recent closing price at $56.30. 

It probably doesn't need to be said that Mark Zuckerberg didn't have much management experience when he dropped out of Harvard to found Facebook. His employees don't seem to think it matters: he has a 99% approval rating, the highest of any CEO in Glassdoor's study. 
 

 

3. Google Inc. ( GOOG): Google is the world's most popular search engine. Market cap at $387.46B, most recent closing price at $1,150.53.

Larry Page co-founded Google with Sergey Brin in 1998. As hardware guys, they handed the company over to vetern software executive Eric Schmidt in 2001 to help make search more profitable. But in 2011 Larry Page took over again. He has a 95% approval rating. 
 

 

4. Citrix Systems, Inc. ( CTXS): Designs, develops, and markets technology solutions that deliver information technology services on-demand worldwide. Market cap at $11.36B, most recent closing price at $60.44.

Citrix CEO Mark B. Templeton rose to the top ranks after just 2 years in the marketing department, and then to CEO after two more years. He has a 95% approval rating.

 

5. Amazon.com Inc. ( AMZN): Operates as an online retailer in North America and internationally. Market cap at $185.50B, most recent closing price at $399.61.

Jeff Bezos was a hedge-fund analyst until he had an Aha! moment in 1996. Noting the high growth of internet use, and a Supreme Court case which would free online retailers from paying sales tax, Bezos drew up the initial business plan for Amazon on a cross-country road trip. Often noted for his attention to detail, Bezos has an approval rating of 93%.
 

 

6. Starbucks Corporation ( SBUX): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $55.76B, most recent closing price at $74.90.

Howard Schultz worked for a small coffee company heading up a sales staff of 20 when he stumbled upon a small coffee franchise in Seattle. He tried to convince the original owners of Starbucks to imitate the style of cafes that abound in Italy – which double as espresso bars and meeting places. They didn't like the idea so Schultz went out and started his own company, quickly growing large enough to buy the Starbucks brand in just a few short years. 

 

 

( List compiled by James Dennin, a Kapitall Writer. Analyst ratings sourced from Zacks Investments. CEO ratings sourced from Glassdoor. All other data sourced from Finviz.)

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