The important thing to first understand is what constitutes a good management – I think this is one subject I believe is grossly misunderstood.
I think in most cases (not all), it is nothing more than a perception which changes with the Stock price.
Most analysts link good managements to the stock prices of their companies – I am talking this from my experience of last many years.
What I experienced is that when these stocks were trading at low valuations & low prices, there was not much interest of analysts and brokerages & these were brushed off as companies with management issues.
If everything else in the company looks OK & the management does not talk to the analyst or conduct Investor or Analyst concalls, such managements were labelled as being Investor unfriendly.
When the price moves up 5 to 10X from those levels, you start seeing analyst reports & suddenly the management quality would start looking good.
For me, a good management is one who is focussed on the business – Has skin in the game aka high promoters stake – allocates capital diligently – shares the wealth with Investors in the form of share buybacks & dividends.
Even companies which may not pay dividends (because of high Dividend distribution tax) but uses the earnings for regular Capex & scaling up a business without Equity dilutions. This too enhances shareholders value.
I think not making impressive investor presentations or not conducting Investor Meets and concalls are factors which are unimportant for judging a management as far as I am concerned.
2 replies on “Ashish Chugh: What is a Good Management?”
“For me, a good management is one who is focussed on the business – Has skin in the game aka high promoters stake – allocates capital diligently – shares the wealth with Investors in the form of share buybacks & dividends.”
Add “and run the business in the most profitable manner” (you can’t share the wealth with investors unless you run the business most profitably)- to sum up the Management Quality issue.
The quality of management may be judged by the experts. But it is difficult for the common investors. Hence we believe on the financial reports, and investors calls.