09-19-2015, 01:02 PM
I love this topic. I think people are heavily influenced by the old Peter Lynch books which strongly suggested that individual investors could somehow get to know and evaluate a company's management. Personally, I think in this day and age it is pretty much an illusion.
Of course you can watch them in the media, and listed to investor calls, and make gut evaluations about whether they sound like straight shooters or weasels, but I'd say that's not too reliable.
But the big opportunity is simply to watch and evaluate their actions. Are they forthcoming about problems, or evasive? Do they prudently manage debt, or take huge risks? Do they treat employees well?
One good example that jumps right to mind is MCD. The company is getting a lot of bad press for being in trouble, and one complaint (especially from franchisees) has been that the menu has gotten way too complicated to be administered quickly and effectively. Management has said that they understand this problem and are working on simplification. But at the same time, they are rolling out all-day breakfast and are experimenting with customized burgers, which has some franchisees even more upset. So which is it? These actions may not in fact be bad ones, and may not even be at odds with simplification, but they do raise a flag. This does not make MCD a bad investment, but for the moment, in evaluating it as a potential investment, MCD's management gets more skepticism than, say, MO or O.
Of course you can watch them in the media, and listed to investor calls, and make gut evaluations about whether they sound like straight shooters or weasels, but I'd say that's not too reliable.
But the big opportunity is simply to watch and evaluate their actions. Are they forthcoming about problems, or evasive? Do they prudently manage debt, or take huge risks? Do they treat employees well?
One good example that jumps right to mind is MCD. The company is getting a lot of bad press for being in trouble, and one complaint (especially from franchisees) has been that the menu has gotten way too complicated to be administered quickly and effectively. Management has said that they understand this problem and are working on simplification. But at the same time, they are rolling out all-day breakfast and are experimenting with customized burgers, which has some franchisees even more upset. So which is it? These actions may not in fact be bad ones, and may not even be at odds with simplification, but they do raise a flag. This does not make MCD a bad investment, but for the moment, in evaluating it as a potential investment, MCD's management gets more skepticism than, say, MO or O.