5 Nobel Prizes Emphasize the Value of Behavioral Economics in Investing. See How Stock Movements Are Predictable with CEO Behavioral Insights
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No one denies that a great leader can turn pennies into gold, and a bad leader can turn gold into pennies. Like in professional sports, a superstar can take a team to a championship or create dysfunction and disappointment. Yet in financial modeling, there is a lack of quantitative measures to assess senior leaders and their impact on the organization. We believe a leader's biases, decision lens, and behaviors impact an organization's stock price, mergers and acquisitions, marketing spend, R&D investments, financial leverage, innovation, culture, and many other performance factors.
A lot of investors lost money in Boeing because they did not know how Dave Calhoun would lead the company. Boeing is a blue-chip company known globally for aerospace innovation and design, and it is the maker of 42% of commercial airliners and 90% of cargo planes. After multiple crashes of the 737MAX, Boeing replaced their CEO in 2020 with Dave Calhoun. Calhoun, a Jack Welsh protégé from GE, brought instant credibility and assured shareholders that Boeing’s problems would be behind them.
Analysis of over 2500 public companies and 8500 individuals on the NYSE, NASDAQ, and other exchanges. Over 100K transcripts, 500 behavioral constellations, and 72 algorithms that reveal 2500+ correlations and significant findings related to company performance.
NRG Energy Inc. (NRG) pushed out Mauricio Gutierrez and named Lawrence Coben, Ph.D. in November, 2023. Gutierrez was a poor fit despite his background and education in energy.
Conversely, Coben’s profile indicated he was a great fit. I invested immediately, and the stock is
now up 90% YTD.
Buffett said investing was a simple comparison of the company’s value
compared to the stock price. Yet, like sports teams, value is predicated on the coach and players. Shockingly, in my experience at a top-tier hedge fund and
as a portfolio manager of a mutual fund, we don’t have a consistent and reliable quantitative approach to value
leadership. LeaderMind provides
standardized evaluations with detailed comparisons to competitors, staff, and the market that improve our models and
investing strategies.
