Books for Financial Freedom
Get Naked in the Shower – not in the Stock Market
By Donald Bittar
You might as well be naked if you invest in a Company without knowing the Company’s management. Unquestionably, an innovating, motivating management is the most valuable asset a Company can have. They are capable of extraordinary achievement while extracting the best of opportunities. On the other hand, an inept management can deflate the value of a Company while squandering market share, cash and opportunity. You’re not investing, but speculating, if you’re buying a stock with inept management. Knowing the management of a Company is one way to avoid a vulnerable naked investment in the stock market.
Being the biggest in an industry is not always a guarantee a Company will remain the biggest. IBM, Kodak and General Motors were once the biggest in their industry. The inability of their management to recognize and systemic shifts in their industry was a major factor in the demise of their company. FedEx, Harris and Apple are examples of management with the genius to innovate and develop the best from opportunity. They led their companies to a dominant position in their market. Take a look at the competitors for your Company. CNN Money and Google Finance can help you identify the competitors for your Company if you don’t know them. One useful measure of your Company’s management is to compare their performance with the competitor’s performance. Several 0ther useful benchmarks are:
Stock market analysts spend their time being familiar with an industry and the companies in the industry. Like the detectives Dave Robicheaux, Brenda Leigh Johnson and Harry Bosch, stock market analysts used a combination of industry contacts and shoe-leather research to investigate individual stocks and industries. Often they are able to piece together interesting and useful insights about the companies they cover and their management. Bloomberg and The Street publish a list of analysts they consider to be better than most. Comparing the Company’s press releases with the analysts’ opinions can help you develop a more balanced view of the Company and its management. You can find the press releases for your Company by going to the Investor Relations page of the Company’s website. Links to the Investor Relations pages for 100 of the most widely held companies can be found here.
The annual and quarterly financial reports, filed by public companies with the Securities and Exchange Commission, disclose all material off-balance sheet transactions, arrangements, obligations and relationships which may have a material current or future effect on financial condition of the Company. The reports tell the story about the Company’s competition, achievements and management’s vision for the future. You can get a good look at your Company’s management in the annual report. It will give you a biographical sketch for your management and the number of shares they own. The reports are free and available online from the SEC EDGAR website. This tutorial can help make EDGAR a powerful and easy to use analytical tool. Listen to Jim Chanos, Jim Mahar and Alexis Glick explain why it’s important to read the annual report of a public company.
Without knowing the management of your Company you’re not investing but making a naked speculation. You can protect your investment better by:
Get suited up with the facts. Make better investments and fewer speculations.
Donald Bittar is an author, CFO, educator and entrepreneur. Donald’s e-Books are published by Trunity publishing. His full featured, interactive, digital business books have been read by thousands of students and business people.
More eBooks by Donald Bittar
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