Measuring Managers' Mettle: A Revealing Investment Gauge
A critical part of the investment appraisal and company evaluation process is gauging management effectiveness, quality, character and values. Surprisingly, this essential aspect is often disregarded by Wall Street, unconcerned with character differences among the companies it covers.
In crucial moments when events panic investors and a stock nose dives, executives are usually temporarily incommunicado. The ultimate basis of a judgment call in those circumstances is whether management can be trusted.
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It also holds true over the long term. Who would you rather invest in, trustworthy or cagey executives? You need to get a handle on executive values in companies where you have an investment.
There are a number of recurring styles and molds—some are constructive and others are detrimental. Many times executives are not lying; they are just uninformed, naïve, or overly optimistic. They can be eternal lowballers, always in a hype mode, taciturn, or shrewd storytellers.
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