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

Credit: Rvierstone Holdings Limited

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 267% 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 four important insights from the interview that may be useful for investors. Here they are.

1. Differentiation in a competitive industry

2. Constant innovation

(For the first two insights, click here)

3. Broadening its offerings

“To insulate revenues, the company diversified into healthcare gloves.

“After the 2008 financial crisis struck, our cleanroom glove demand plunged by 50%. That was when we decided to convert some of our production lines to make nitrile gloves for the healthcare industry,” Wong said.

While cleanroom gloves command better margins, demand for healthcare gloves is more resilient. Pharmacies, hospitals and clinics continue to use gloves even in a downturn, he added.

It is also broadening its customer base. With hard disk drives becoming a sunset industry, it is supplying gloves to other segments in the technology sector, such as solar, battery and flat panel display makers.”

Differentiation is one way for Riverstone to stay ahead. Constant innovation is another way. Wong, though, has taken a step further by diversifying Riverstone’s offerings to various industries.

As Wong muses above, the healthcare industry can provide stability in revenue during recessions. Riverstone is actively moving into new cleanroom sectors like the mobile and tablet industry as well.

4. Leadership and succession

“With this older generation of colleagues, issues concerning the protection of intellectual property and poaching by competitors hardly ever arise.

“We are now grooming the younger generation, who are in their 20s and 30s, but they may not have the same sense of belonging as we do,” he noted. “The question is: Can the younger generation continue this culture in the company? That is an unknown, and remains to be seen.””

If you’re a long-term investor, part of your investing thesis may include the issue of succession planning. That is, if we plan to hold a company’s shares for years or even decades, then leadership succession should be a consideration.

Thankfully, Wong recognises the importance of grooming a future generation of leaders for Riverstone, even though it is still a work in progress at the moment. There may be ample time for Wong to figure out this issue given that he’s only in his mid-50s.

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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.