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  • Writer's pictureIshfaaq Peerally

Investing in Management



What to look for in the management of a company when investing?


It is important to look at the management of a company before investing in it because when you're investing, you're hiring the management including the CEO. You want the best CEO to work for you.


If you're investing in a stock, you don't have any control over the company if you're a small shareholder. That's why it is important to look at the management. There have many instances where bad management ruined a good stock. For example, Wells Fargo $WFC .


It is also important to know the CEO of the company. Is he/she a Wartime CEO or a Peace-time CEO? Steve Jobs was a Wartime CEO while Tim Cook is a Peace-time CEO. Today what Apple $AAPL needs is a Peace-time CEO and that's why we cannot really compare the two. The best CEO should be both like JPMorgan Chase CEO Jamie Dimon $JPM .


How do you know the CEO? Warren Buffett $BRK.B would recommend interviewing him/her but it is certainly not possible for the small shareholder. You can, however, watch interviews on YouTube and read about them. You can also listen to the quarterly earnings calls.


You also need to read the financial statements to make sure that they are not selling you snake oil. Numbers don't lie but sometimes management will try to manipulate numbers such as what happened with Enron. As soon as you see something fishy, better stay away.


It is possible to invest in a company where you don't really like the management but there should be a big margin of safety.


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