As my colleague pointed out in this article several years ago, listed founder-led companies have historically outperformed the rest of the market by some distance.

There are a number of factors that are potentially behind this phenomenon, but I think Ben Horowitz from venture capital firm Andreessen Horowitz sums it up best.

When explaining why Andreessen Horowitz prefers to invest in companies that are founder-led, Mr Horowitz said:

“Founding CEOs naturally take a long view of their companies. The company is their life’s work. Their emotional commitment exceeds their equity stake. Their goal from the start is to build something significant. They instinctively know that big product cycles come from investment and that even the biggest product cycles will eventually fade.”

Mr Horowitz added: “Professional CEOs, on the other hand, tend to be driven by relatively shorter-term goals. They are paid in terms of stock options that vest over 4 years and cash bonuses for quarterly and yearly performance.”

This is seen as a big negative, as it takes time to innovate.

“Investments in innovation do not pay out in the current quarter. Typically, they don’t even pay out in the current year. If you care about your bonus this year, you are directly incented not to make investments in new inventions as you will incur the expense, but reap no profits,” he explained.

Given the success that Andreessen Horowitz has had investing in founder-led companies, it’s hard to argue against this.

The venture capital firm made early investments in the likes of Facebook, Slack, Instagram, and Airbnb.

Are there founder-led companies on the ASX?

There are actually a decent number of founder-led companies on the Australian share market for investors to choose from.

I like the look of Kogan.com Ltd (ASX: KGN) as a long term investment. The ecommerce company, which is led by Ruslan Kogan, looks like a big winner from the shift to online shopping.

Another option to consider is Dicker Data Ltd (ASX: DDR). The leading computer hardware and software company was founded by David Dicker and Fiona Brown. It has been going from strength to strength in recent years and shows no sign of stopping. Mr Dicker remains the company’s CEO, whereas Brown sits on the board.

A final founder-led company which I would invest in is ResMed Inc. (ASX: RMD). The sleep treatment focused medical device company has been an exceptionally strong performer over the last decade thanks to the growing demand for its products and software.

ResMed founder Peter Farrell is the Chairman of the company and his son, Mick Farrell, has been the Chief Executive Officer since 2013.

More reading

• The 3 ASX tech stocks that helped this fund manager outperform in May
• ASX 200 investor in your 40s? 3 shares to buy now
• These ASX shares just zoomed to multi-year highs
• Buy these ASX growth shares for monster returns
• Real wealth from 3 roaring mid caps in May

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Kogan.com ltd. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Zip Co Ltd (ASX: Z1P) share price has returned from its trading halt and rocketed higher this afternoon.

At one stage the payments company’s shares were up as much as 44% to $5.40.

They have since pulled back a touch, but are still up a sizeable 36.5% to $5.12.

Why is the Zip Co share price rocketing higher?

Investors have been fighting to get hold of the shares of the Afterpay Ltd (ASX: APT) rival after it revealed that it has entered into an agreement to acquire the remaining shares in New York-based buy now pay later provider QuadPay.

According to the release, the company has agreed an all-scrip deal. This will see QuadPay stockholders entitled to receive up to a maximum of approximately 119 million Zip shares, which will represent the equivalent of 23.3% of the issued share capital of Zip at completion.

This implies an enterprise value of approximately US$269 million or A$403 million, but will be accretive for Zip on both a total transactions volume (TTV) and revenue basis.

Management notes that the QuadPay acquisition builds on its global strategy and believes it is a compelling investment proposition for shareholders.

This is because QuadPay is one of the leading buy now pay later platforms in the United States – the world’s largest retail market, which is estimated to be worth US$5 trillion per year.

The company also notes that this acquisition will turn Zip into one of the world’s leading global buy now pay later players. 

If the acquisition completes, the company will have operations across the world in five countries (Australia, New Zealand, United States, United Kingdom, and South Africa). It will also have combined annualised TTV of $3 billion, annualised revenue of $250 million, 3.5 million customers, and 26,200 merchants.

Convertibles notes.

In addition to this, the company has entered into an agreement with CVI Investments, Inc., an affiliate of Susquehanna International, to raise up to $200 million by way of the issue of convertible notes and the exercise of warrants.

The convertible notes have an initial conversion price of $5.5328, which is a 47.7% premium to its last close price.

These funds will be used to help accelerate Zip’s growth in the United States and other core markets.

Zip CEO and Co-Founder, Larry Diamond commented: “We are delighted and excited to have the QuadPay team join the Zip family. As a strategic investor in the business, we have spent considerable time with the founders, Adam and Brad, and share a united vision of disrupting the outdated credit card with a digital, and fairer alternative.”

“The US is a critical part of our global strategy and vital as merchants increasingly look for a global payments solution. We have been impressed by QuadPay’s continued innovation. They were first to market with a virtual card solution in the BNPL space and have continued to evolve and innovate their offering. We look forward to this exciting new chapter in the Zip journey,” he added.

Shareholders will be able to vote on the acquisition and convertible notes at an extraordinary general meeting. Should they be given the go-ahead, management expects to complete both in the first quarter of FY 2021.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why the Zip Co share price rocketed 57% higher in May
• This ASX fintech share is up 489% since March
• Real wealth from 3 roaring mid caps in May
• 4 ASX fintech shares to make you rich

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is the CSL Limited (ASX: CSL) share price a buy?

In the initial stages of the coronavirus share market sell off the CSL share price remained strong in Australian dollar terms as the US dollar strengthened.

But over the past week the CSL share price has actually fallen by 7% despite the share market strengthening.

CSL was seen as a bastion of safety with its healthcare services. It’s the number one in global plasma therapies and the number two for flu vaccines. Those are essential services. 

That’s why the CSL share price didn’t drop anywhere near as much as shares like National Australia Bank Ltd (ASX: NAB) or Qantas Airways Limited (ASX: QAN).

But we saw the Australian dollar weaken to as low as $0.57 compared to the US dollar during March 2020. The Aussie dollar has since strengthened to $0.68. That makes a big difference when looking at CSL’s earnings which are reported (and a large portion is generated) in US dollars.

CSL recently announced new debt facilities to strengthen its debt profile.

Is it a good time to buy CSL at this share price?

The healthcare giant is aiming for a net profit in FY20 of between US$2.11 billion to US$2.17 billion. This would be another solid result after years of impressive growth already. The company continues to invest heavily into research and development to ensure that it continues to produce the new needed products for people. New treatments could make a big difference to the world. It’s one of many businesses looking to find a coronavirus treatment. 

I think it makes a lot of sense to invest in CSL when the Australian dollar is so strong. It’s certainly not cheap, so I wouldn’t want to buy a lot. But I’d be willing to be some today.

More reading

• Why I would buy these ASX 200 blue chip shares in June
• In your 50s? Here are the 2 best ASX 200 shares to buy now
• Why Austal, CSL, Fortescue, & Star shares are charging higher today
• 5 ASX 200 winners and 3 losers from last week
• ASX 200 Weekly Wrap: Surging bank shares push ASX toward 6,000

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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