In our current economic environment, many are looking for companies helmed by great leaders. Tom Gardner, co-founder and CEO of The Motley Fool, recently discussed leadership with former Medtronic CEO Bill George, author of “True North” (Jossey-Bass, $30) and “Authentic Leadership” (Jossey-Bass, $20). George is worth hearing out, as he led Medtronic to a 60-times increase in its value during his 10-year tenure. He identifies five dimensions of an authentic leader:
• First, leaders must have a purpose. They must know why they want to lead and where they’re going.
• They must practice and live their values every day — and not just the ones they articulate.
• They must lead with their hearts, not just their heads. Obviously, intellect is necessary, but George believes that having the heart is key: “This means having the passion for the work, having a real understanding of compassion for the people you work with, having a real deep understanding and empathy for your customers, and having the courage to make difficult decisions.
“When you think about it, passion, compassion, courage and empathy are all matters of the heart, not of the head. There are so many leaders who have been brilliant leaders but have failed because they failed in that dimension.”
• George noted that many leaders have vast networks of superficial relationships, when they really need deeper networks, where there’s “a sense of two-way commitment between the individuals.”
• His fifth dimension is “having the self-discipline to get results.”
George suggested that “anyone who wants to be can be a leader in their own way. … Maybe they wouldn’t be the best CEO, but they certainly can lead in their own way. They can set the standards for other people, and they can demonstrate a certain level of enthusiasm and commitment that can cause other people to want to perform better. … Those that fail typically are ones who are trying to be something different than who they are. They come across as fake.”
Ask the Fool
Q: Are stocks or savings bonds better for kids? — H.K., Denver
A: It depends. The stock market is best for long-term investments — at least five years, if not more. If the money will be spent on college, see how many years you have until your kids are 18. If it’s for their future use as adults, it might grow for a few decades.
Putting short-term money in “safer,” less volatile investments such as savings bonds or CDs will give you a modest return and minimize losses. But over most long periods of time, stocks will outperform bonds and CDs.
An index fund is a great way to start with stocks. You might also invest at least a little money in the stock of a few companies that your children know, such as McDonald’s or Nike. Then you can follow the fortunes of the companies and your investments together, as they learn about the stock market.
Q: What does it mean when I see that “Today’s Volume” for a stock is 16,300,000? — P.W., Batavia, N.Y.
A. Imagine the Scandinavian drug maker, Fryyndar and Ulf Pharmaceuticals (ticker: GULPP), whose motto is “Varsågod och svälj!” (That’s Swedish for “Here, swallow this pill!”). If its current volume is 16,300,000, that just means that so far today, 16.3 million shares of the stock have changed hands. Volume can vary widely — IBM averages about 10 million shares per day, vs. 1.7 million for Burger King. If a stock’s volume is much higher than its average, then something is probably going on, such as good or bad news.
My smartest investment
Years ago, a friend who visited Los Angeles told me about a line half a block long outside a Krispy Kreme doughnut shop. When it went public in 2000, I bought some shares at $36. Over just about a year, the stock rose and split twice. I sold half of my stake between the splits and the rest in 2002, netting a 190 percent gain in less than two years. — W.L. Fink, Escondido, Calif.
The Fool responds: You did well, especially in your selling of the stock, as it has recently been trading for around $1.40 per share. Investors were very excited about Krispy Kreme at first, many swayed by the devotion of its fans.
But it’s not enough for a company to have a popular product. The company must also manage its finances, operations and growth effectively.
Krispy Kreme’s revenue has been falling over the past few years, as it struggles to turn its losses into gains. It may well turn itself around, but for now, there are much safer investments around.
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