I’ve come across countless arguments over the past few years over the relevance of quality management when it comes to picking stocks.
“Managements don’t matter!” was the powerful argument that I heard in the heydays of the pre-2008 era. And these people showed me stock market returns to prove how companies with shaky management teams could generate huge shareholder wealth.
Well, I had no words to counter them because even when I knew who was swimming naked (companies with bad managements), the fact remained that all of them were covered up by the rising tide of the stock market boom.
Cut the chase to 2012, and I’m ready with some good proof of what happens to companies who take minority investors for a ride, when the tide goes out.
These are the companies that…
- Chase growth at all costs
- Kill their balance sheets by taking on excessive debt
- Make random and overpriced acquisitions
- Secretively sell shares at discounted prices to group companies
- Pay their top people big money even when all other stakeholders are facing the music
- Have loud-mouthed, egomaniacal CEOs running the affairs
[Read more…] about When Companies Take Minority Investors for Granted…