Wednesday, November 12, 2008

Stock selection - management

I have shared before how to calculate how much a stock is worth and therefore knowing when to buy at what price.

However, that is just one of the methods.  The one shared above is a quantification method using calculation.

In real world, when you buy a business that is NOT run by you, the ultimate Single Main Factor is

Who Is Running The Business ?

The company may did great or terrible in the past, what really matter is who is running the business now and what he or she is going to do about it.  So the more and closer you know about the management of the company you are buying, the better position you are in.

I have seen many times stock buyers simply buy in blue chips because the company was doing great.  Without realizing the successful CEO has left replaced by a half empty manager.  Needless to say, all things go downward since then.

So when you are ready to buy a particular stock, spend a little bit more time to find out who is running the company.  Check and see if there are any hanky panky stories came out from google.

If possible, try writting them a letter or email and see if you get any reply.  Try to meet and talk to them.  Usually the really great successful CEOs are friendly while those blood sucker CEOs will just slamp door on your nose.

With a Good management, 
a bad company has a chance 
to be great again !

Without one, 
the best company 
will eventually sink indefinitely ...

6 comments:

ChampDog said...

Thanks for the tips. I'm thinking of Apple. If Steve Jobs die, what will happen to Apple? Can Apple still as innovative as today?

Michael Tsen said...

it will surely drop a bit, but personally I think steve is impeding innovation, his latest few 'ideas' are really not that advance comparing to gadgets come out from china and taiwan, not to mention japan and korea i think its time apple to be bought over by a 3rd world country and take it to next phase ... hee hee hee

stock wise, apple is one of those stocks that is NOT a good buy due to its poor management in finance. most supporters for Apple is purely on innovation, technology etc. investors who seriously want the money back usually don't keep money there ... those who has some to spare and love steve would put the money in yes.

although has one or two great products, most other apple products miss the market or die prematurely before reaching market, that is not a good 'business' sign.

ChampDog said...

Isn't that this is how the innovation company should be - fail most of the time?

Personally I do agree with you that one day apple will be taken over by the rest. My opinion is that Apple used to have a history fail in execution. Sooner or later people will follow/copy and make a better one. The history will repeat again.

Anonymous said...

Are you guys having time to play at the updown.com yet? I found it extremely useful as a starter and gains lots of info from there.
Im starting with the basic resources and I wonder if i should try UPS as it is one of the top gainers but it is not in my 'basic' needs... What do you think? How do you start to consider WHAT to buy?

OoT

Michael Tsen said...

champdog: yes thats how an innovation company should be. but innovation alone is not a good business so I would 'support' innovation a lot because of my 'personal interest' but its is NOT a good 'business' to invest into if that company cann't deliver.

oot: to start pick a stock is to start asking yourself what do you like most, I have briefly mentioned this before but will re-write to emphasize this point again soon, thanks for the question.

** OUT OF TRACK 思 想 出 軌 ** said...

Cant wait for your new posts.

what do i like most? Commercial wise I like jewelries, cosmetics and leather goodies but those are not top gainers on board. Is this suppose to be what I choose?
thats (2)

(3) While investing in stocks, do you wait anxiously for trying to make "many" quick money in between, or, do you wait steadily for the long term basis? I do remember you have a post on this, but I wish hear it from you again on this.

While I virtually invest on updown.com, Im tempted for selling it for short income but I do remember what my teacher taught me for the 'ultimate goal' so i have stayed on... but as at today I have lost 0.95% :(