Tag: Management

Actions speak louder than words !

In a recent interview with Guru Focus ,value investor Rohit Chauhan pointed out very important points regarding approaching equity investing. One of the points which stood out for me was below [emphasis mine]

12. Before making an investment, what kind of research do you do and where do you go for the information? Do you talk to management?

I follow the usual process of reading up on the last 10 years of financial statements and annual reports. In addition to that, I also try to understand the economics of the industry and competitive landscape. Finally I try to work through my checklist to analyze the idea from as many view points as possible.

I do not depend on talking directly with the management as much and base my decision more on what the management has shared in the conference calls and how they executed the plans.

As investors we are susceptible to falling for compelling stories created by management & media therefore often are unable to do an unbiased assessment of a an investment situation. This can lead to less than optimum investing outcomes. It pays to watch what management is doing than what they are talking.

As social

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Learn to evaluate management

Evaluating management is one of trickiest part while building an investment case. Especially, when it comes to small caps and mid cap companies run by first or second generation promoters, were much information about them in not available publicly.

Also many of retail investors don’t have privilege to meet management, time to attend AGMs and question management over quarterly conference calls (if they do). So how does one evaluate management ?

Well I don’t have a panacea but in this post we will try an establish a process which can give us reasonable ammunition to understand and evaluate management. As an investor you start with a hypothesis that management is honest, able, trustworthy and intelligent and then as you run a series of checks, you may find that one or more components you wished for are missing therefore at the end of checks you can take a call whether you want to partner with such management or not.

While there are numerous parameters which you can use to evaluate management quantitatively we believe below are good for a start

  1. Depth
  2. Integrity
  3. Disclosure Norms
  4. Compensation
  5. Skin in the Game
  6. Regulatory compliance issues
  7. Walking the talk

 

Depth – While evaluating depth … Read the rest