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I've long been a Honeywell, $HON shareholder.
Despite having read all annual reports, I found Dave Cote's new book one of the best reads in 2020. h/t @GWInvestors
I was amazed to find it was a treasure cove 2 make better life decisions. Ended up making a blogpost.
Thread
Despite having read all annual reports, I found Dave Cote's new book one of the best reads in 2020. h/t @GWInvestors
I was amazed to find it was a treasure cove 2 make better life decisions. Ended up making a blogpost.
Thread
2/ History:
Very few people remember that HON was once on the verge of bankruptcy in the early 2000s.
Dave, who wasn't even in the race to succeed Jack Welch at GE, was selected as the last choice to run HON.
Full post https://theinvestingprinciples.com/from-americas-most-messed-up-firm-to-most-admired/
Very few people remember that HON was once on the verge of bankruptcy in the early 2000s.
Dave, who wasn't even in the race to succeed Jack Welch at GE, was selected as the last choice to run HON.
Full post
https://theinvestingprinciples.com/from-americas-most-messed-up-firm-to-most-admired/
3/ CAGR since 2003:
$HON: 14%
$GE: -5%
$SPX: 9%
Since HON's entry into software in 2013;
$HON: 19%, has defied the law of large size to almost match returns of smaller industrial software compounders:
$ROP: 20%
$AME: 17%
$IEX: 22%
$HON: 14%
$GE: -5%
$SPX: 9%
Since HON's entry into software in 2013;
$HON: 19%, has defied the law of large size to almost match returns of smaller industrial software compounders:
$ROP: 20%
$AME: 17%
$IEX: 22%
4/ Successful Habits:
a. Blue Book sessions
Carve out time for yourself, putting aside your job's daily pressures, and think independently.
b. Are you giving too long presentations?
Have faith in rigorous analysis rather than satisfying intellectual curiosity.
a. Blue Book sessions
Carve out time for yourself, putting aside your job's daily pressures, and think independently.
b. Are you giving too long presentations?
Have faith in rigorous analysis rather than satisfying intellectual curiosity.
5/
c. Take Your 3 Min.?
If you have 5 min. to solve a problem, use the first 3 to figure out how you're going to do it.
d. Avid Reader: he reads 5 newspapers a day & books on diverse topics like IoT, AI, law, and social media not to become an expert but to ask intelligent Qs.
c. Take Your 3 Min.?
If you have 5 min. to solve a problem, use the first 3 to figure out how you're going to do it.
d. Avid Reader: he reads 5 newspapers a day & books on diverse topics like IoT, AI, law, and social media not to become an expert but to ask intelligent Qs.
6/ Experience is overrated:
Just a little bit of experience combined with a lot of raw talent is worth far more.
For HON's hiring process, he made sure that the team was always asking themselves, "Could this person be the next Tom Brady?"
Just a little bit of experience combined with a lot of raw talent is worth far more.
For HON's hiring process, he made sure that the team was always asking themselves, "Could this person be the next Tom Brady?"
7/ Are you taking career risks to succeed?
They asked a young leader to run a $4 bn business located in Switzerland.
The leader declined, perceiving it as too risky a career move. He was eliminated from the CEO probable list. https://www.amazon.com/gp/product/1599510219?ie=UTF8
They asked a young leader to run a $4 bn business located in Switzerland.
The leader declined, perceiving it as too risky a career move. He was eliminated from the CEO probable list. https://www.amazon.com/gp/product/1599510219?ie=UTF8
8/ An unconventional approach to Long-Term Compensation:
Along with outstanding returns for investors, HON made thousands of its employees 401(k) millionaires, with 95% below the executive level and the lowest compensated, earning an annual salary of only $43,000.
Along with outstanding returns for investors, HON made thousands of its employees 401(k) millionaires, with 95% below the executive level and the lowest compensated, earning an annual salary of only $43,000.
9/ Behavioural models to beat Black-Scholes math:
Taking a leaf from the thread of @10kdiver & @ChrisBloomstran on SBC:
HON did a survey to find that its employees valued stock options much lessâin their minds, 10 options to 1 RSU... https://twitter.com/10kdiver/status/1330218926836490247?s=20
Taking a leaf from the thread of @10kdiver & @ChrisBloomstran on SBC:
HON did a survey to find that its employees valued stock options much lessâin their minds, 10 options to 1 RSU... https://twitter.com/10kdiver/status/1330218926836490247?s=20
10/
...Considering this behavioural bias, it increased the proportion of RSUs, issuing 6 options to 1 RSU instead of the conventional 3.
Fewer shares than Black-Scholes math. Leaders liked it, retention improved, and the company wound up saving money. https://twitter.com/ChrisBloomstran/status/1320480964422807558?s=20
...Considering this behavioural bias, it increased the proportion of RSUs, issuing 6 options to 1 RSU instead of the conventional 3.
Fewer shares than Black-Scholes math. Leaders liked it, retention improved, and the company wound up saving money. https://twitter.com/ChrisBloomstran/status/1320480964422807558?s=20
11/
India Success Story - go local for global.
Success in India & China is what differentiates HON from being a global leader. When many leaders were afraid to do R&D in places like India, fearing engineering quality, he took an early lead vs. competitors.
India Success Story - go local for global.
Success in India & China is what differentiates HON from being a global leader. When many leaders were afraid to do R&D in places like India, fearing engineering quality, he took an early lead vs. competitors.
12/ $APPL of the Industrials sector:
From having worked at his father's garage doing odd jobs to working as a carpenter in Michigan, Dave learned the importance of customer satisfaction and working without an ego early on in his life...
From having worked at his father's garage doing odd jobs to working as a carpenter in Michigan, Dave learned the importance of customer satisfaction and working without an ego early on in his life...
13/
...Honeywell has a branded initiative called the "Honeywell User Experience" (HUE) to achieve its stated goal of becoming the "Apple of the industrial sector." https://www.youtube.com/watch?app=desktop&v=WowjMkidlAw
...Honeywell has a branded initiative called the "Honeywell User Experience" (HUE) to achieve its stated goal of becoming the "Apple of the industrial sector." https://www.youtube.com/watch?app=desktop&v=WowjMkidlAw
14/ While there's no substitute for reading the entire book, & my blog post 
, I'd recommend the following resources:
@DavidNovakOGO outstanding podcast with Dave Cote and with @TomBrady https://open.spotify.com/episode/5v2qn6SWJpkN8852x49TLa?si=vpdC4AkmT26PBuT4fD1lnw https://open.spotify.com/episode/5dPjA6xbU0FJIwlTdUx4w5
, I'd recommend the following resources:@DavidNovakOGO outstanding podcast with Dave Cote and with @TomBrady https://open.spotify.com/episode/5v2qn6SWJpkN8852x49TLa?si=vpdC4AkmT26PBuT4fD1lnw https://open.spotify.com/episode/5dPjA6xbU0FJIwlTdUx4w5
15/ 15
GreenWood Investors blog on Dave Cote.
I've been following them since their 2014 thesis on Fiat (being a common investor). Even though they draw an interesting conclusion, I'd agree on the same by holding Sergio Marchionne above most others. https://www.gwinvestors.com/thinking-now-later/
GreenWood Investors blog on Dave Cote.
I've been following them since their 2014 thesis on Fiat (being a common investor). Even though they draw an interesting conclusion, I'd agree on the same by holding Sergio Marchionne above most others. https://www.gwinvestors.com/thinking-now-later/
