There’s a leadership rule in the sporting world that translates well when it comes to the stock market, and investors can use it to find winning stocks, CNBC’s Jim Cramer said Monday.
“The coaching tree is a pretty simple concept: if you hire top assistant coaches who’ve learned firsthand from the most successful leaders in the game, they’ll be able to take that knowledge with them,” Cramer explained. “We know that there are some incredible CEOs out there who, in addition to creating enormous value for their shareholders, have also trained some very impressive disciples. Inevitably, some of these disciples leave to run companies of their own.”
Eventually, that lineage can evolve into an “executive tree,” similar to the National Football League’s famous coaching tree stemming from legendary coaches Bill Parcells and Bill Belichick, the “Mad Money” host explained.
“The best executive tree I can think of descends from … Marc Benioff, the visionary founder, chairman and co-CEO of Salesforce.com,” Cramer said. “Benioff’s got a real knack for fostering talent, … and when his lieutenants move on to run other companies, they have a habit of delivering some incredible performance for their investors.”
Benioff, who founded Salesforce in 1999, has four main branches in his executive tree so far, Cramer said. The first is Tien Tzuo, who was Salesforce’s 11th employee, its first chief marketing officer and its first chief strategy officer.
After nine years at the company, Tzuo founded his own subscription-service business, Zuora, which went public last April. Cramer has been bullish on Zuora, which helps other companies launch and manage their own subscription-based businesses, since the IPO.
“Tien Tzuo literally wrote the book on the subscription economy, called Subscribed, and the numbers here have been downright incredible. I don’t want to diminish Tzuo’s own accomplishments. He had a brilliant idea here. [But] what first drew my attention to it was his corporate pedigree — the Benioff executive tree. It’s one of the reasons I’ve been such a big believer in Zuora,” Cramer said. “I think it’s got a lot more room to run.”
The second branch in Benioff’s tree is Peter Gassner, the founder and CEO of Veeva Systems. Gassner used to be Salesforce’s senior vice president of technology and had a hand in building the cloud company’s platform.
Now, he’s applying cloud tech to a whole new space with Veeva, which builds cloud-based software for the pharmaceutical, biotechnology and life sciences industries to streamline their operations and boost efficiency.
“The sustained long-term growth here has been phenomenal, […] much like, well, Salesforce.com. Gassner’s background as a Benioff acolyte was among the reasons I started recommending it ages ago,” Cramer said. “I’m still a believer, although with the stock making a new all-time high, sure, of course, wait for a pullback.”
Benioff’s third branch is Todd McKinnon, the co-founder and CEO of identity management company Okta. He served as Salesforce’s head of engineering for over five years, overseeing its growth from 2 million transactions per day to 150 million.
The growth at Okta, which doubles as a cybersecurity play thanks to its specialty in authentication, has been “explosive,” with the stock nearly quintupling in value since its 2017 IPO, Cramer said, adding that he would buy shares on a pullback.
McKinnon himself nodded to Benioff’s influence when he came on “Mad Money” on Okta’s 10th anniversary, telling Cramer that he “basically learned the ropes of cloud computing from Marc and the entire team at Salesforce.”
The fourth and final branch is Twilio’s Chief Operating Officer, George Hu, who was COO and chief marketing officer at Salesforce. Twilio is a cloud-based company focused on software-enabled communication that boasts clients like Uber.
“While Twilio wasn’t actually founded by a Salesforce alum, he has done a terrific job as COO and it’s not hard to see how his experience has helped the company advance its mission of helping other businesses connect with their customers,” Cramer said. “The stock has rallied more than 250 percent since George Hu joined the company in March of 2017 after leaving Salesforce. Another win for the Benioff executive tree.”
The bottom line? Sometimes, you don’t have to look far from the executive tree to find stocks ripe for the picking.
“The next time you hear about the concept of the coaching tree in the NFL, remember the same rules can apply to the business world,” Cramer concluded. “When you’re trying to pick stocks, look for networks of executives who’ve learned from the best, because as we see with the former disciples of a guy like Marc Benioff at Salesforce, they can give you some fabulous gains.”
Disclosure: Cramer’s charitable trust owns shares of Salesforce.com.
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