2 Key Insights from the Chief Executive Officer of a Market Beating Stock

Riverstone Holdings Ltd (SGX: AP4), a maker of both cleanroom and healthcare gloves, has been a strong market beating stock over the past five years.

Since the start of 2011, shares of the company have risen by 271% in price. In comparison, the SPDR STI ETF  (SGX: ES3), an exchange traded fund that mimics the fundamentals of the Straits Times Index (SGX: ^STI), had recorded negative returns over the same period. To learn more about Riverstone, you can check out here.

Recently, Wong Teek Son, Riverstone’s founder and chief executive, was featured in an interview series by bourse operator Singapore Exchange Limited  (SGX: S68). I had managed to pick out two important insights from the interview that may be useful for investors. Here they are.

Differentiation in a competitive industry

“Competition in the industry, however, was intense. There were at least 300 glove factories in Malaysia – most found it tough to survive and many closed down.

“We realised we needed to provide a service to our customers – it’s not just about making and selling gloves,” said Wong, who also holds a Master in Business Administration from Australia’s Monash University.”

In this paragraph, Wong highlighted the importance of differentiating his company from its competitors. To stress his point, Wong points out the difference between just “selling gloves” and providing a value-added service.

For instance, customers in the hard disk and semiconductor industry may be concerned about things like contamination control, electrostatic discharge (ESD), corrosion, and particle control.

By collaborating and jointly developing its gloves with its customers, Riverstone is able to differentiate itself with value-added services. Actions like these may help the company maintain its margins despite competitive pressure.

Constant innovation

“This culture of constant innovation is the linchpin of Riverstone, which boasts a 20-strong R&D and technical team and an annual output of 5.2 billion gloves.”

Differentiation is crucial, but Riverstone has to continue to innovate to stay ahead. Keeping its key staff is part of the battle. According to Riverstone’s investor relations firm, the glove maker has managed to retain all its key staff (chemists) since its inception while keeping overall attrition rate at around 5%.

For more stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.