Getting the Market Right: Andy Gordon on the Importance of Company Leadership

Steve McDonald
by Steve McDonald, Bond Strategist, The Oxford Club


SM: Our guest this week is Andy Gordon, and he’s here to talk about what he thinks is one of the single most important things that he uses when he picks a stock. It’s getting to know the officers and the founders of a company.

AG: The very top of the leadership, yeah.

SM: Tell us about this.

AG: Well, when you invest as early as I do - and we’re talking about investing way before a company IPOs, investing when it’s just getting off the blocks... maybe it’s done its seed round or maybe we’re investing in the seed round. You’re looking at a company that doesn’t have many hard metrics.

You can’t look at sales at this point; even the product oftentimes isn’t finished.

SM: So these are companies that are in development, just getting started - you know, Apple in 1985.

AG: Yes. You know what the one constant is for companies at this very early stage? The people who run the company, the people who founded the company. Hopefully they’ll be around for a very long time, heading that company.

So if those people are exceptional leaders and exceptional executioners, it makes a great deal of difference. Even if they’re just good - but not great - that’s not good enough for us.

SM: Well, what kinds of things do you look at?

AG: We end up having a lot of conversations with these people over the phone. And we look at a lot of things.

They have to have exceptional knowledge and experience in their field. I call it “looking for the unfair advantage.” I want to be talking to a founder who is telling me things I had no idea about - who gets me thinking, “I don’t think anybody else in that field - the other founders and experts - knows nearly as much as this person does.”

When I’m thinking that to myself, I’m thinking, “This founder is going to be able to keep one step ahead of the competition.” That’s very important to me.

That’s just one thing. There are other things we look at as well. Founders should have serial experience, having worked and led startups before... and having led those startups to successful exits. We think that’s very important.

SM: Now you can pick up the phone and say, “Hi, I’m Andy Gordon from Early Investing. I’d like to come over and talk to you, and maybe recommend your company to people.”

AG: I can.

SM: But most of the people out there can’t do that. How can they get the same information?

AG: That’s true. And the mainstream press doesn’t talk about any of these people.

There are a couple sites I can suggest. One is called Crunchbase lists all the startups and lists all the people running the startups.

And everything is clickable. So you can click on a person and see what previous startups he’s led. You can click on that startup and see what investors have invested in his previous startups. You can click on the investors and see if you agree with their portfolios - so you can really go as deep as you want.

SM: Now, I’m really surprised that someone hasn’t turned this into a business yet.

AG: Well, Crunchbase is a business. It’s an information database kind of website, but it makes money from doing this.

The other site is And it does basically the same thing. I use both because sometimes one is better than the other, but they’re both very good... and there’s not much else out there that is available to the public.

SM: This is one of those things that most people ignore... or don’t even know is an issue.

AG: They don’t know, and you need to know. I mean, it’s so important.

I think people tend to stay away from this because they think it’s such a “soft” way to evaluate a company - looking at the leadership. But looking at the leadership is so important. And with a startup, it’s absolutely huge.

SM: Once again, what were those websites?

AG: and

SM: Sounds like great advice to me. Even if you’re not looking at startups, knowing who’s driving the ship is important.

AG: Absolutely.

SM: Thanks so much for being with us.

AG: Sure.

Thoughts on this article? Leave a comment below.

An All-Star Play on Strong Leadership

Alexander Green understands the importance of company leadership better than most. In fact, he has a whole portfolio devoted to funds run by managers with exceptional track records.

The Oxford All-Star Portfolio boasts some of the highest gains available to Oxford Communiqué subscribers.

And the Templeton Dragon Fund (NYSE: TDF) is one of its best performers.

Here’s Alex checking on the fund a few years ago...

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He understands that China is transforming itself from a world-class exporter into one of the world’s biggest importers.

China already imports nearly as much as it exports, over $1 trillion of goods annually. Chinese consumers now buy more automobiles than Americans do. Oil production there is massive - and it still meets only half the country’s needs. And China is also the world’s second-largest consumer of luxury goods.

Mobius has concentrated the Templeton Dragon Fund’s investments in sectors like consumer discretionary, automobiles, energy, wireless telecom, utilities, food companies, computer manufacturers and hotels. With China’s rapidly growing middle class, these areas should be excellent investments over the next few years.

It’s not unusual to hear unhappy buy-and-hold investors refer to the last 10 years’ performance of the U.S. stock market as “the lost decade.” But Mark Mobius has done a fine job for us. Including dividends and capital gains distributions, our shares are up 440% since we started buying the fund 15 years ago. If you reinvested those dividends, your return is higher still.

- Samuel Taube with Alexander Green

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