How We Can Assess Competency For Companies In Asia?
A pillar for investing is to be able to identify competency and integrity of the people running the show.
We often hear of how people always mention this, but when the time comes for us to personally find out for ourselves, more of than not we might be at a lost.
Today we have a short clip (An interview conducted by the Manual of Ideas) featuring Mr Yeo Seng Chong of Yeoman Capital Management on how we can practically assess competency during our investment adventures in Asia.
Yeoman Capital Management is no new kid on the block. With their flagship fund, the Yeoman 3-Rights Value Asia Fund achieving a compounded annual growth rate of 13.36% over close to 18 years (As at Mar 2015), it would be good for us to pay attention to their lessons in this short clip!
In summary, some things for us to take note of when going about our assessment is to look out for issues like:
- Track record – Show a degree of consistency and resilience in terms of profitability and financial position
- Dividend record – Dividend mandate
- Management compensation – In line with profitability
- Dilution – Is it reasonable and fair to minorities
- Huge CapEx Requirements – Perpetual black hole?
- Focus on Business: Any strange Acquisitions
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At the end of the day, this is obviously not a exhaustive list to assess management.
However with that being said, the result of our findings will more than be able to provide us with a decent starting point to dig deeper. Remember what Warren Buffett says about never being only a cockroach in the kitchen, if a company has one of these red flags, most of the time, there tends to be more of them lying around!
Coming up with a checklist of such allows us to filter out the bad eggs more often than not. And this helps to increase our margin of safety with the rest of our potential investments!
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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.
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Thank you, a tremendous video that emphasises clear objective ways to evaluate companies and their management. As mentioned by Mr Yeo Seng Chong, its very useful to judge a company by the actions of the management (and if they have been publicly listed – their record is presented for us to investigate).
Thanks for your comment Paul! Yes, we agree that having a ‘checklist’ of sorts will be able to provide us with a more structured approach to check for the degree of competency and integrity in the company’s operations. This will provide us with some degree of measurability towards assessing some of the traditionally more qualitative points!