What are the attributes of a well managed company?

Question

Cramer says to buy stock in "well managed" companies on pull backs after a secondary offering completion. How do you determine if a company is well managed or not?

Answer 1

Warren Buffett has 5 key management and marketplace characteristics he looks for:

1)  Invest where management can admit things are bad.  Value investors seek managers willing to admit mistakes and be honest about their view of the future.

2) Invest where managers have a "here today, here forever" mentality.  The best managers have no financial need to work...they run their businesses because they love doing so.

3) Don't bet on a single manager or individual.  If a business requires a superstar to produce great results, the business itself cannot be deemed great.

4) Don't invest in industries prone to rapid change.  One one series of events is needed for success.  But hundreds of events can go wrong, resulting in failure.

5)  Avoid companies with no durable advantage but substantial capital requirements.  Example airline companies, auto companies.  Seek companies producing more capital than they consume.

Even if the best managers ran GM or Ford, it would take many years to close down the SUV and Pickup lines and retool to make Honda civic knockoffs.

Answer 2

Signs of a well managed company.

1.  Meet or exceeds EPS:

Some companies will more than likely meet or exceed this earnings estimates time and time again.  This means that management understands the companies business model, and is efficient.

2.  Return on Equity:

This shows that the company has good project management skills.

3.  Any business news regarding the company:

Sometimes, you will find that companies will obtain more contracts for future business.  It shows that management is proactive in obtaining theses relationships, which in turn provide profits for shareholders.

4.  Institutional Holdings:

Good management will spill over to confidence with mutual fund managers.  These managers have a slew of analyst that follow each and every step of the company.  All they do is research information and report it to the managers.

For a perfect example, review IBM and Washington Mutual.  Cramer truely believes in the management of IBM, and he recently called the CEO of WM Washington Mutual the "worst CEO, ever".

If companies are falling short of these then management doesn't have a clue about the business.  These are positive indicators.

Oh and commenting on the diversification of the company.  Not every company has the luxury of doing so.  If you look at GE's performance when Jack Welsh was CEO (who could be one of the best in the history of corporate america), the stock performed well.  Over the past 4-5 years that hasn't been the case.  One could argue that GE is extremely diversified, but the stock hasn't done squat.   Why?  Because poor management is why.

Answer 3

my ans 2

Answer 4

A well manged company has good ratios.  No, not P/E - try things like AR turnover, Inventory ratios and the like.  These ratios tell you how well management is performing.  For instance, AR Turnover is indicative of management's collection policies/procedures/ability (bad AR turnover may lead to cash flow issues for example)

Hit the income sheet, read the SEC filings and conference calls to discover if YOU thikn it is a well manged company.

Answer 5

Stock Recommendation: Try To Read It   http://NewNYSE4u.com

Answer 6

Companies that are differsified. Look for companies that that sale all their products to an other company and does not worry about consumers companies solely depending on  other companies like Semiconductors. Example.

Answer 7

- Action: Employees can and will act to make good things happen.

- Clarity: Everyone at the company knows the company's purpose and buys into it.

- Discipline: If someone is s******g up or behaving badly, they know it and are shown how to correct their behavior.

If a company you're looking at as an investment has been stagnant, is mealy-mouthed about what they're about, or has had a lot of high-level misdeeds and can't seem to get their act together, run.