Letter to Editor

I am extremely pleased by your latest issue’s cover story which not only outlined the recent outperformance of mid-cap and small-cap stocks but also highlighted the future outlook for the same. Can you elucidate how investors can assess the quality of management before buying stocks?

- Avanti K

Editor Responds: We appreciate your query and are grateful to know that you found our cover story in the recent issue worthwhile. Evaluating the quality of a company’s management is an underrated yet critical aspect of equity research and is often overlooked by investors. A strong management team acts as a backbone for any high-quality successful company. To quote Warren Buffett’s 1989 letter to shareholders, “Stick to proven management with a lot of integrity, talent and passion. After some other mistakes, I learned to go into business only with people whom I like, trust and admire.” Investors could consider factors such as the top management’s compensation, length of tenure and equity holding in the company, capital allocation strategy over the years, past acquisitions, reliance on debt, stock buybacks, related party transactions and cleanliness of books of accounts to assess management quality. Keep writing to us with your queries