Management

l.o.jones8686

There is a strongly held view by many in the investment world, that management is critical to the growth of a company.

Therefore, my question is that when investing in a company on a stock exchange, e.g. the LSE, how do you go about ascertaining the quality of the management team in place? Is there any way to communicate with management before investing?

Playing_with_Fire_2

Go to the company's website and look for an Investors page; read the Annual Report; look at the decisions that the company makes (products launched, new projects, etc); read the mission statement/value statement/business proposition.

Sam_J12

Warren Buffet has written extensively about this, I recommend you look up some of his writings. He is a huge believer in good management being the key to a successful business.

jimjames

If you're a shareholder you can attend the AGM and ask a question to management as well as hearing them speak about the business. Not sure if you can attend if you're not a shareholder or press.

reeac

Beware of necessarily believing bullish predictions in Annual Reports. I got my fingers burned by GEC back in the early 2000's. I still have their Summary Financial Statement for 1999 in which Lord Simpson, the Chairman, stated "I believe that future historians will see it as a turning point in the modern development of our Company ....". It was .....he bankrupted GEC by not only spending their much-derided "cash mountain" but also by borrowing to fund acquisitions bought at the peak of the dot com boom.

l.o.jones8686

Some excellent points made. My current viewpoint is that before making an investment decision, it is of paramount importance to get a feel of the management.

I attend conferences where CEOs/directors present on their company but apart from that, I cannot find any means to converse with management. This I find difficult, especially when investing significant capital into one company.

Does anybody have any further suggestions as to how to engage with management, particularly online? Also, it would be interesting to hear from other equity investors in terms of their experience with engaging with management.

Reeac, perhaps your management would not of been so bold with their forecasts if they were more connected with investors and knew there would be recourse for this clear ramping.....

TheTracker

l.o.jones8686 wrote: »

Some excellent points made. My current viewpoint is that before making an investment decision, it is of paramount importance to get a feel of the management.

My view is that the value of a company has already built into it the relative value of the management behind the company. So unless you feel you have more insight or ability to see the worth of the management that, on average, all others did not (i.e. you have an edge), its folly to go down this path.

l.o.jones8686

Hi 'TheTracker'. Thank you for your feedback.

It's an interesting point. My view is that the market largely determines the value of a stock by the equilibrium between the buyers and the sellers in the market, and the analyst forecasts that have been predicted.

These analyst forecasts are predicated on various models, usually DCF + TNAV. It is my experience that an analyst's feeling or perception of management is seldom factored into the calculation.

This herein creates an opportunity I believe. Warren Buffett was correct, management is key for company progression. If there was a portal for investors to be able to speak with management, it would give them the edge over other investors as they could base their decision on management as opposed to analyst forecasts.

Linton

Do you have the knowledge and experience to make a valid judgement on the capability of the senior management? Can you get the insight you need from a short public meeting? I doubt in any case they would be interested in talking to you unless you were proposing to buy a serious % of the company's value. And if you were, perhaps an MSE forum isnt the best place to get advice.

When I invest in individual shares I purely look at public factual data - what is the company's business and does it fit in with my asset allocation? Does the company pay a good dividend and is it sustainable? Has the company made a loss in the past few years? etc etc.

I dont share your belief that analysts forecasts have a significant impact on share prices. Of course the price is determined by the equilibrium between buyers and sellers, that is what a market is. However most buyers and sellers are traders chasing a short term gain. A very different objective to most private investors.

AndyT678

l.o.jones8686 wrote: »

I attend conferences where CEOs/directors present on their company but apart from that, I cannot find any means to converse with management. This I find difficult, especially when investing significant capital into one company.

The CEO and FD of my employer hold regular face to face meetings with investors, flying hither and yon around the world to do so. I'm sure they'd be happy to meet you too. How many hundreds of millions were you thinking of investing?

bigadaj

I would guess that the cost of the management is factored into the share price generally.