Alpha Ideas

Source: Samir Arora

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.

–said Ashish Chugh