3 Stocks That Would Rally if Their CEOs Were Fired: Microsoft Corporation (MSFT), Cisco Systems, Inc. (CSCO)

If Johnson was let go, shares would rally on the hope that the new CEO could reverse some of the changes and stop the bleeding. To be clear, J.C. Penney still has cash on its balance sheet, and over $3 billion in available financing, but if the current trends continue, Johnson’s turnaround strategy could destroy the company.

Cisco shares have barely moved over the last decade
Like Ballmer at Microsoft, many believe Cisco’s John Chambers has let his company stagnate.

Chambers has run Cisco Systems, Inc. (NASDAQ:CSCO) since 1995. For the first several years of his tenure, the company experienced rapid growth and a rising share price. But over the last decade or so, Cisco shares have largely stayed put around the $20 mark.

As companies’ IT needs have changed, Cisco has been unable to innovate, failing to take advantage of new business trends like cloud computing. A Reuters report from late 2011 speculated that Chambers could soon step down. About a year and a half later, Chambers remains CEO.

The heat on Chambers has receded somewhat in the wake of a recent, relatively strong earnings report. Shares of the networking giant are up about 11% in the last three months.

Still, when viewed over the last year, shares are up a paltry 3.5% (compared to an 11% gain for the S&P 500). Chambers stepping down could be seen as a sign that Cisco would shift its strategy back to growth.

What should investors think?
Changing CEOs is frequently a sign of changing corporate strategies, and it can provide a lift to the share price. However, that rally might only be temporary if the new CEO can’t follow through.

Both Microsoft and Cisco are relatively ancient tech companies whose businesses have stagnated for the last decade. Replacing them could shift both companies back into growth mode.

Of course, as Ron Johnson’s tenure at J.C. Penney shows, that shift to growth mode can have disastrous consequences. Once stable business models can be torn to shreds in only a few quarters as the company pursues an untested strategy.

The important thing is for investors to be aware of CEOs and their strategies. After all, their decisions control the company’s future.

The article 3 Stocks That Would Rally if Their CEOs Were Fired originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

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