How to analyze the management of a Company?
This writeup will discuss the key steps/tools that investors can use to find companies with good management & avoid bad management. One must read this carefully & inoculate them in his/her stock analysis process so as to avoid falling into the trap of unethical management that benefits at the expense of minority shareholders.
"In evaluating a common stock, the management is 90%, the industry 9%, and all other factors are 1%. "
- Phil Fisher, Path to wealth through common stocks
Investors would acknowledge that it is the management alone that acts as the 100x catalyst
Simple steps to do Management Analysis:
- Promoters’ background check
- Promoters’ salary
- Related party transactions
- Management's focus on stock price
- Dividend payments
- Accounting juggernauts
We will elaborately discuss each step in the subsequent sections.