Company Near-Death Experiences

As of 2016, the best performing stock over the prior three decades was a company few people have likely heard of. Per an article by WSJ journalist Jason Zweig, Balchem’s share price has risen by 107,099% since the end of 1985. The most interesting part of the article was that it expanded this universe to all U.S. stocks that have experienced returns in excess of 10,000%, and then looked for any commonality:

Over the past 30 years, 44 U.S. stocks generated cumulative total returns of 10,000% or more, according to FactSet. The 10 behind Balchem are Home Depot Inc., Amgen Inc., Nike Inc., UnitedHealth Group Inc., Danaher Corp., Altair Corp., Kansas City Southern, Jack Henry & Associates Inc., Apple Inc. and Altria Group Inc. All grew by at least twice the rate of the S&P 500.

Perhaps the most notable thing they share, says David Salem, chief investment officer at Windhorse Capital Management in Boston, is that “they have all undergone at least one near-death experience.”

In a WSJ interview Mr. Martin Roper, the former CEO of Boston Beer, commented on the challenges he faced growing one of the largest craft brewers in the U.S. The response that stood out to me involved the company’s near-death experience:

Mr. Roper: In ’08, we identified at one of our breweries that there were pieces of glass in bottles. We didn’t know how widespread it was. We made the decision to recall. We inspected several million cases and destroyed nearly a million. As CEO, you’re just thinking, ‘This company is going to die.’ It was the first full-scale recall in the beer industry that we were aware of. We were writing the playbook over a weekend. Looking back on it, the lesson is do the right thing and your customers will come and help you, and ask your employees to do incredible things and they will go way further than you expect. And frankly, do the right thing, and the brand will be stronger for it.

Click on the link below for the rest of the interview.