Peter Drucker, Management Legend

Peter Drucker died Friday at age 95. Drucker is well known as a guru and pioneering thinker in management. Drucker's thinking changed the way enterprises are managed. Drucker's influence was broad and can be seen in leaders and people who think about leadership from Jim Collins to Jack Welch to Rick Warren.

While many people have focused on the terms Drucker coined and the movements he started, I think the most impressive thing about Drucker is the enduring wisdom of much of his writing. Drucker is one of the few, great thinkers whose thought seems are relevant today as it did when it was written, in Drucker's case often over forty years ago. It is fairly easy to write something that seems intelligent today, it is much, much harder to write something that will seem intelligent forty years later.

Fortunately for all of us, we live in an age where competition has reduced the price of knowledge, and Drucker's work is still in print, so do yourself a favor and pick up some of Drucker's best work today.

I'll leave you with a quote from Drucker's last interview with Forbes, a thought that all successful people, weather in business or politics should keep in mind:

"Successful leaders don't start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me?" They don't tackle things they aren't good at. They make sure other necessities get done, but not by them. Successful leaders make sure that they succeed! They are not afraid of strength in others. Andrew Carnegie wanted to put on his gravestone, "Here lies a man who knew how to put into his service more able men than he was himself." "


Timothy Burger
timothyb(at)timothyburger.com

New Pension Rules

The Wall Street Journal Reports that the FASB has decided that companies must now report net pension liabilities on their balance sheet.

While companies already had to file a footnote to financial statements detailing pension assets and liabilities, I would imagine that moving the net liability onto the balance sheet will make it harder for management to carry big pension liabilities since the net number will be more visible.

FASB will be conducting a more in depth review of pension accounting in the near future, hopefully they deal with the unrealistic rates of return companies routinely assume for their pension assets.

Timothy Burger
timothyb(at)timothyburger.com

Trade deficit Up

The US trade deficit hit a record of $66.1 billion in September. The increase was driven by higher oil prices and weaker aircraft sales.

The continued growth of the current account deficit should be a big negative for the dollar. However, there are currently a couple of things working in favor of a stronger dollar.

As always the US's position as the most productive and innovative economy is the key to the dollar's strength. However, the recent rioting in Paris underscores the value of political and social stability. While the US has turned in some pretty dismal trade statistics over the past few years, the long term structural strength of the US economy seems to be bolstering the dollar versus the euro.

Timothy Burger
timothyb(at)timothyburger.com

Leucadia National

Over the past week I have seen two articles about Leucadia National, referring to it as the Baby Berkshire. Leucadia has grown at an annual rate of 33% since 1978 by making timely acquisitions of beaten down companies.

I just wanted to make sure that everyone knew that Leucadia Director Jay Nichols is teaching a class on profitable entrepreneurial growth at the University of Kansas School of Business this semester, and one of the companies he is planning on discussing is Leucadia. KU continues to build on a solid curriculum in investment management and value investing.

On a side note, KU finance students will travel to Omaha on December 2nd for a question and answer session with Warren Buffett. I had the opportunity to be a part of last year's team that had the opportunity to present an investment idea to Buffett, it was an incredible opportunity. This year's group is currently evaluating two private and one public company to potentially present to Buffett on the second.

Timothy Burger
timothyb(at)timothyburger.com

Pay Attention to Oplink

The next three days will be very interesting for Oplink shareholders.

Oplink is a small company that manufactures optical networking components. The company has been a favorite of the KU APM portfolio for a while, due in large part to the company's large cash position, and the large stake in the company held by class founder Kent McCarthy.

McCarthy and the KU APM class (among other shareholders) have been pushing for Oplink to use their cash to buy back shares. Oplink holds more cash than they could possibly need for operations, and a share repurchase would both boost the share price as EPS increases, and prevent Oplink from making a bad acquisition with the cash.

Today Oplink announced that they are instead going to do a 1 for 7 reverse stock split. The reverse split will take effect tomorrow, that is a fast timeline.

It is also interesting because the next day (Nov. 10th) each board member receives 26,000 options. A quick reverse split the day before an options grant, interesting.

I have never bought Oplink shares, even when the stock was trading barely above cash. I have never had a good feeling about Oplink management, they have always seemed a little too self interested, and a little too antagonistic towards shareholder concerns. More importantly, I have never really felt like the company has a clear plan for the future, or a clear competitive advantage.

It this will definitely be an interesting week for Oplink shareholders, and I think that at the end of the week we will be able to tell if management is running the company for shareholders, or for themselves.

Timothy Burger
timothyb(at)timothyburger.com