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Lessons Learned

How four CFOs are investing their money these days.

The way Rone gauges such potential has become much more specific in recent years. He has given his brokerage firm, Little Rock, Arkansas-based Stephens Inc., a “matrix” that outlines his criteria. Specifically, Rone wants answers to three questions: What has been the stock’s price range in the past 12 months, what is the caliber of the management team, and how strong is the company’s cash position? The matrix also takes into account the ratio of a stock’s market price to its book value, as well as revenue and cash flow per share as compared to those of competitors. “I don’t care what your profit position is,” he says. “If you have negative cash flow, eventually you are going to go bankrupt.” Rone has even managed to negotiate with his brokerage for lower fees in exchange for its use of the matrix.

Like Rone, Kelly Parsons, CFO of Accenture HR Services, says she “does a lot more research” these days, spending 5 to 10 hours a month scouring analyst reports, Securities and Exchange Commission documents, and news articles on potential investments. She pays special attention to the makeup of the management team, assessing “where they have been and how they left their previous firms.”

CFOs come in for additional scrutiny, she says, since “it is difficult not to be critical of your own profession.” In particular, she tries to assess whether or not a CFO can manage the dual pressures of meeting quarterly earnings and reining in a hard-driving CEO. And Parsons finds clues both by talking to analysts and examining the CFO’s track record, including where he spent his formative professional years. “Was it a big blue chip, solid, publicly held company or a small, private company?” she asks. “With the former, you can expect that there were significant numbers of good senior professionals from whom to learn. With the latter, there may not have been so many.”

Hedging All Bets

Whatever their own investment philosophies, CFOs can’t advise employees on their portfolios, according to Department of Labor rules. But that doesn’t stop some employees from looking to them for an informed opinion on the economic outlook. People have a way of saying, “How’s it going?” when they want to gain a little insight, says Brooktrout’s Leahy. He answers such inquiries with information on important customer wins or other key indicators of Brooktrout’s business prospects. Likewise, Goldfinger couches his assessment of the broader economy in terms of where Empirix “is hitting seams in the market.”

Still, no matter how optimistic those assessments, even CFOs sometimes make investment decisions based on purely personal reasons. Goldfinger, for example, does hold one individual stock in his portfolio — a sizable amount of PepsiCo, where he worked for nine years in various finance positions. After moving on in 1998, he says he retained the shares “as a hedge against the chance that I’d later regret the move.”


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