An observation you might like to consider: Fundamentals are fine and they indicate the past journey and potential future direction, but it is the quality of management which will deliver the future reality. I feel most comfortable of the future when management have significant skin in the game, have shown recent willingness to invest on market, have their short and long term incentives tied to shareholder returns AND have a proven record of delivering on their outlook announcements.
Much of management review is subjective, unfortunately. I think the most important subjective review is to trawl through company announcements to get a grasp of how factually accurate they are with forecasts and the way they present their accounts. A red flag for me is a consistent distortion between their ‘underlying’ earnings and statutory earnings.
Yes, I agree. but, it can be hard to miss the forest for the threes there. Most CEO’s are good speakers and could probably convince most vegans to start eating bacon. I’m not sure I have the ability to separate them based on their presentations etc. Honesty when things go south surely helps though (eg. F.Wester Paradox CEO). A big drawdown for me with Palantir, which seem to hide bad stuff. But harder to know when it’s thesis breaking.
So you don’t look at incentive structure? I feel that can say a lot of how they are thinking about creating shareholder value and aligning incentives
Yes, as I indicated in my first post, having short and long term incentives locked into the growth of shareholder value is crucial. Avoid selfish, greedy management at all costs.
Thanks, I agree. Tried investing once in a pre-revenue battery maker. Big Bonuses to management before producing a single cell was enough for me. Integrity is key
Good article. Good approach. Wish you well.
An observation you might like to consider: Fundamentals are fine and they indicate the past journey and potential future direction, but it is the quality of management which will deliver the future reality. I feel most comfortable of the future when management have significant skin in the game, have shown recent willingness to invest on market, have their short and long term incentives tied to shareholder returns AND have a proven record of delivering on their outlook announcements.
Thanks!
Yes, what metrics/traits you look for in this regard, other than owner operators? Incentive structure, long CEO tenur, glass door ratings?
The average company in the portfolio has insiders owning 15% of shares outstanding.
Much of management review is subjective, unfortunately. I think the most important subjective review is to trawl through company announcements to get a grasp of how factually accurate they are with forecasts and the way they present their accounts. A red flag for me is a consistent distortion between their ‘underlying’ earnings and statutory earnings.
Yes, I agree. but, it can be hard to miss the forest for the threes there. Most CEO’s are good speakers and could probably convince most vegans to start eating bacon. I’m not sure I have the ability to separate them based on their presentations etc. Honesty when things go south surely helps though (eg. F.Wester Paradox CEO). A big drawdown for me with Palantir, which seem to hide bad stuff. But harder to know when it’s thesis breaking.
So you don’t look at incentive structure? I feel that can say a lot of how they are thinking about creating shareholder value and aligning incentives
Yes, as I indicated in my first post, having short and long term incentives locked into the growth of shareholder value is crucial. Avoid selfish, greedy management at all costs.
Thanks, I agree. Tried investing once in a pre-revenue battery maker. Big Bonuses to management before producing a single cell was enough for me. Integrity is key