how important is looking at the quality of management when we are looking to buy stocks from a particular company?

Question

Junus Eu · Accepted Answer

It is important, BUT a difficult one to evaluate.

Take for example the Singh brothers, once heirs to the Indian healthcare empire, Fortis Group. They were the poster boys of the Indian healthcare industry, and  commonly seen on the likes of Forbes and Bloomberg.

Malvinder Singh and Shivinder were once the wealthiest among the people below 40 on the Forbes India list, and were at the 16th position with a combined networth of USD 4.2 billion.

Within a few years since inheriting a fortune from a company founded by their grandfather, the Singh brothers have managed to lose almost everything — including control over two public companies. And the Indian healthcare industry is by no means a sunset industry.

Food for thought.

Sandra Teo · Answer

A company with strong management will have the company's and investor's best interest at heart. You don't want a management who gives out overly generous salaries or enter into questionable deals. A strong management will also make the right moves to remain competitive in a changing marketplace and today's volatile market.

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Isaac Chan · Answer

I think that quality of management is quite important, especially for stocks that you want to hold for the long term. The impact of management would most probably felt more for investors in the long term. If you are a trader and looking for intra-day trades, it could be less likely that management's decisions will make an impact on your trade. That being said, the quality of managment should most likely be priced in the value of the stock as well, as part of the stock's and business' fundamentals.

This question would also most likely depend on the influence management has in the company. If management is onboarded to turn around a company, like in the case with Starhub, investors would most likely pay much more attention to the management. For a company that is operating in a very mature and stable industry, the role of management might be less significant.

Richard Woon Tian Jun · Answer

Very Important - management are the ones who decide on the direction of the firm. If they are unable to instill confidence within the investors, who are people like you, then there won't be anybody willing to hold their stock! Firms are worth something precisely because people want to buy a part of it, and management is a big part of the reason. Just look at the wrong choices that certain management have done thus far in history - Kodak and it's obsession with the film cameras, Sony and their obsession with high quality without regards for price, which have all led to the decimation of alot of market share for these past giants. no matter how good a business model may look then (eg. physical rentals of movies, bike sharing) if you are unable to adapt to the changes of tomorrow, your firm can never hope to succeed in the future.

Ernest Yeam Wee Leong · Answer

The management do plays a key role in deciding what is the next step the company must take to grow the business or how it handles situation that may avert a crisis on hand.

A negative example will be Singpost management who made the wrong decision to purchase US ecommerce companies like TradeGlobal Holdings Inc and Jagged Peak which affected their earnings.

Another example will be Irvins Salted Egg whose 1 of the products had lizards in it. The CEO and management did a great job of doing customer recovery and made no attempts to hide their wrongdoings. This resulted in greater publicity and support for the brand.

It will be tough to know if the management is capable or incapable, only time will tell but looking at their track records will be a good rough gauge.