One of the best-performing stocks in Singapore over the last 10 years is Riverstone Holdings Limited (SGX: AP4). At $0.90, the company grew its share price by more than 350% during that period. Comparatively, the Straits Times Index (SGX: STI) grew by about 35%.
For those who are new to the company, Riverstone is a glove company with two segments: Cleanroom gloves and medical gloves.
We want to know how this simple business delivers such impressive returns to shareholders over time, and whether we can learn something from it. Personally, I think the answer is yes! We’ll look at a few points on why below.
To start with, Riverstone operates in a huge market that has been growing strongly in the past decade. See the chart below on the global demand for gloves:
Source: Top Glove’s Investor Presentation
Thus, as one of the leading players in this industry, Riverstone has benefitted enormously from this significant tailwind in the past decade. What’s more, there are plenty of signs that such tailwinds will likely continue for the foreseeable future.
Though Riverstone operates in an industry with favorable tailwinds, it must still execute well in order to deliver value to customers, which in return, rewards shareholders.
And it did just that in the last decade. To start with, Riverstone has been consistently profitable for the last 10 years. Moreover, both revenue and net profit have grown at a compound annual growth rate (CAGR) of 20.6% and 18.2%, respectively, from 2008 to 2018. I believe such a track record is admirable.
Another ingredient that I strongly believe has contributed enormously to Riverstone’s strong performance is its owner-operator structure.
Here, we define owner-operator as major shareholders who are also the management of the company. In Riverstone’s case, Wong Teek Son (Chairman and CEO ) and Lee Wai Keong (Chief Operating Officer) owned 50.75% and 10.92%, respectively, of Riverstone’s shares in 2018. As both the owner and operator of Riverstone, it is assumed that the duo acted in the best interest of minority shareholders.
Though it is difficult to quantify the benefit of investing in a company operated by owner-operators, minority shareholders have so far benefited well over the past decade via the higher share price and growing dividend.
It is clear that Riverstone has delivered enormous returns to shareholders over the decade. As investors, it’s useful for us to learn about the reasons for Riverstone’s success, as this will help us find similar companies to invest in in the future.
Personally, I think the above three reasons are the leading contributors to Riverstone’s stock performance over the period.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool has recommended shares of Riverstone Holdings Limited.