Investment Insider: Is it clever to play follow the leader?

Sometimes a business, and not its boss, is where the value lies

Dame Marjorie Scardino transformed Pearson from a sprawling business that had its finger in an unconnected selection of pies.

It was involved in investment banking, tourism, television and printing. But during her reign, Dame Marjorie shifted the company's focus to publication and education through brands that include the Financial Times, The Economist and Penguin books.

In the 15 years that Dame Marjorie was in charge, sales had tripled to nearly £6bn and profits had grown more than threefold.

Over that period, shareholders were rewarded with a total return of more than 200 per cent. In other words, it delivered an average return of around 7 per cent a year over a decade and a half. Since her departure, the shares have continued to deliver similar returns – almost as though nothing has changed. Yet Dame Marjorie and her like are lauded, and their departure can cause a nervous intake of breath from investors.

Apple is an interesting business, whose flagging fortunes were spectacularly revived when co-founder Steve Jobs returned to the company after a 12-year absence. During his 14-year stint, he turned a company that had been on the brink of bankruptcy to one of the most successful high-technology businesses in the world.

Shareholders enjoyed an annualised return of 34 per cent on their investment. Since Mr Jobs's untimely death the returns, while still impressive, have fallen back to around 21 per cent.

Apple recently poached the boss of Burberry, Angela Ahrendts, to head its retail operation from the middle of next year. Ms Ahrendts is credited with building Burberry's image into a global brand.

During her time at Burberry, shareholders have enjoyed a return of around 20 per cent a year for seven year. She will be succeeded by Christopher Bailey, who is reckoned to be as creative as Ms Ahrendts was astute.

Another head honcho on the move is Lance Batchelor, who will be swapping pizzas for pensions. News of his departure from Dominos to join Saga sent shares in the pizza-delivery outfit down by as much as 10 per cent.

It is not just the departure of company bosses that can effect a business. The recent announcement that fund manager Neil Woodford would be leaving Invesco Perpetual prompted some investors to withdraw their money. It is reckoned that assets under management have shrunk by about 4 per cent.

It is unclear whether the departure of key personnel can hit performance. Warren Buffett once quipped that we should buy shares in businesses that are so wonderful an idiot can run them, because sooner or later, one will.

David Kuo is director of fool.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea