Growing Rich - Arabictrader.com

KIRK KAZANJIAN
involved with top management, even offering suggestions when he
thinks they’re going in the wrong direction. Most of the time, he’s in
there telling them what he views as the best way to spend free cash.
“I’m trying to indicate how I feel they can build their private market
value the fastest and therefore get the highest return for investors,”
he says. “Sometimes, if there’s a lack of objectivity on their part, my
suggestion may have to be given in a stronger tone. I’m really not
trying to be antagonistic or condescending. I’m genuinely trying to
help out. Usually I’ll talk to the chief financial officer or CEO directly.”
Yacktman enjoys this kind of access because he takes substantial
positions in the companies he owns. It’s more of a challenge for individual
investors to make their feelings known. Nevertheless, there’s
nothing to stop you from firing off a letter to a company president,
expressing your suggestions. If nothing else, it’s bound to get a fair
reading by someone in the investor relations department.
I asked Yacktman if he felt company managements would rather
he simply remained a silent shareholder. He contends if he provides
input in a diplomatic way, they are usually pretty receptive to what
he has to say. Of course, sometimes corporate executives don’t immediately
see eye-to-eye with him. “When Franklin Quest prepared to
acquire The Covey Institute in 1997, they wanted to do it using a
pooling of interests,” he reflects. “The problem was that accounting
method would have required them to resell about 1.5 million shares
of stock to the public. I didn’t think this route made any sense, because
they had purchased those shares on the open market for a great price.
I suggested they restructure the deal and make it more of a win-win
arrangement. I told them I’d rather have them give the Covey people
some cash and fewer shares of stock so they wouldn’t have as much
dilution. I think cash earnings, which add goodwill back into earnings
per share, are a much better measure of earnings than reported earnings
anyway. They ultimately agreed with me, especially after they
talked with some other large shareholders who saw things in the same
way I did.”
Another time, Yacktman questioned lawn-care provider Barefoot
about why it wasn’t spending all the free cash it had built up to buy
back more shares. Executives kept offering one excuse after another,
which was frustrating. “It turned out they couldn’t say anything because
they were being acquired by another company,” he says. “They
couldn’t give me insider information, and I wouldn’t want them to.
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