The Big Mac and Ralph Lauren's Purple Label were both created by dreamers who could not wait for college graduation. The following will give investors a look at three companies headed by college dropouts that have managed to outperform the S&P 500 since the beginning of the year.
College? I'm Hatin' It
Ray Kroc, often thought of as the founder of the $16 billion McDonald's (NYSE:MCD) empire, actually bought the rights for the franchise and the name from the McDonald brothers. Ray was a milkshake salesman at the time that had previously worked in real estate and as a jazz musician. Today with over 31,000 restaurants in 118 countries McDonald's is committed to the same basic core values of quick and clean service. During the first six months of 2008, McDonald's completed a $2.8 billion buyback of 50.4 million shares and it paid out $848 million in dividends signaling that its financial house is in order. Since the beginning of the year McDonald's is nearly flat, returning -1.64% while the SPDRS S&P 500 Index ETF is down -27.66%. (For related reading, see Is Buying A Franchise Wise?)
Purple Labels Clash with Sheepskin
Ralph Lauren, known for his $4.8 billion Polo Ralph Lauren (NYSE:RL) company, displayed a passion for fashion from his school age years when he would work after school to earn money to buy suits. He moved onto selling neckties of his own design to friends. After leaving college early, serving in the army and working as a Brooks Brothers salesman, Ralph Lauren received backing to start his own necktie store under the "Polo" label. The company's popularity continues to grow. It was chosen by the U.S. Olympic Committee as an official outfitter for the 2008 U.S. Olympic and Paralympic Teams.
The exposure is good for business since Ralph Lauren's fastest growing markets outside of the U.S. are in Europe and Japan. International sales of Ralph Lauren apparel have risen from 19% of sales in 2006 to 25% of sales for fiscal year 2008. Ralph Lauren is down 8.61% since the beginning of the year.
Dropout Data King
Larry Ellison, who once worked on a database for the CIA that he named "Oracle" during the '70s, is the founder of the $22.4 billion Oracle Corporation (Nasdaq:ORCL). Ellison did not finish college, but he was exposed to computer design while attending. Later, a paper on relational database systems instigated the creation of a company that would become the information juggernaut we know today as Oracle. From fiscal 2007 to 2008 Oracle's revenue increased 25% driven by new software license revenue, software license updates and product support revenue. At -18.63% since the beginning of the year, Oracle stock is down the most among our trio of dropout startups.
Not all success stories begin with a college diploma. Investors may be shocked to learn that, along with the successful dreamers we've highlighted above, other successful dropouts include: Bill Gates, Steve Jobs, Kirk Kerkorian (dropped out in grade 8) and Ted Turner. Investor should note that entrepreneurs who can identify products and services that people or businesses need are leading companies that can outperform the broad market even during tough economic times.
Speaking of entrepreneurs and business, check out Small Business: It's All About Relationships.