Sanoma

Many people outside the financial industry may not expect that there are quite a few laughs at hedge funds. Sometimes the humor is work-related. For example, I've gotten into the habit of giving stocks in Antaurus' portfolio nicknames. For example, there is a "bottomless pit. But Sanoma stock also has a nickname: the granny stock. That's mainly in the name SanOMA. Also important is the Dutch CEO of the Finnish concern: Susan Duinhoven. The colleague who follows the stock once showed me a picture of this lady and said half seriously "this CEO looks reliable, doesn't he? Incidentally, Duinhoven is known as a tough sanitizer nicknamed the "iron lady" so looks and nickname are deceiving, but it's still fun.

Now the news came out Monday that Duinhoven is leaving the company, which raises the question of whether a CEO really has such a big impact on results or stock price. There are different opinions on this. Benjamin Graham and David Dodd wrote in their work Security Analysis that management should not be a factor in investment decisions because good managers produce good results and investors pay for the latter anyway. An extra premium on the stock for the good manager (or discount for a bad manager) would be duplicative. Moreover, good managers can also leave again.

Recent academic literature reinforces Graham and Dodd's somewhat subjective observations. Managers of companies in the Dow Jones index failed to transform these companies such that a statistically significant effect on the stock could be measured. Now the Dow Jones consists of 30 very large companies, also known as blue chips. The researchers themselves write that it is likely that a CEO's impact on such a large concern is logically small. After all, blue chips are proverbial oil tankers that are slow to adjust.

Other studies show that CEOs do influence the financial results of companies. However, the companies studied in those studies are smaller and company results are slightly different from stock price. Other studies have again shown that it is good for a company if the CEO stays on for a long time, but not too long. It would be optimal if a CEO stays on for 10 years. On top of that, it is better for successor performance if the previous CEO did not stay on too long.

That turns the gaze back to the granny stock that has a market capitalization of just over a billion euros and whose CEO has announced her departure.

Susan Duinhoven saw the stock price double during her eight years as CEO, although she did come to the club around a low point. So she did quite well for shareholders, but leaving after eight years is - statistically speaking - almost optimal. For the successor, eight years is also fine. Now it's looking forward to a new CEO who will hopefully continue to pay close attention to costs with the same reliable charm.