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It is very important to judge monument quality before investing in any stock. We all know that good management can turn around a poor business while poor management can ruin a good business. Now the big question is, how do you judge whether the management is good or bad?
Suppose you have twenty different stocks in your portfolio. Those twenty companies are headquartered in eight different cities. Before investing, is it possible for you to visit all of those cities to meet the management? I am sure for millions of small investors, it is next to impossible to meet the management before investing in a company. I have serious doubt about the annual’s meeting with management as well. Suppose you are holding the position of CEO for a company and I am the senior research analyst of a reputed brokerage house. During our meeting, will y9u confess any drawbacks of your business? Your primary target will be to please me so that I can compose a good research report and thus boosting the stock price. After all being CEO you will be benefitted the most from the rising stock price. So, it is obvious that management will always try to showcase a rosy picture in front of equity research analysts, this the simple reason behind my doubt on management visit. There are several examples of how, despot multiple company visits, many reputed firms lost big money just bye believing the words of management. On the other hand, attending the Annual Gerald Meeting (AGM) is far more fruitful because you are not alone at AGM. There are a sizeable number of investors and the entire management team to answer quires. Further, attending a conference call is also better than a company visit. After the result announcement, many companies conduct conference call where various analyst can interact with the management directly.
At the same time, I understand that attending every AGM is not possible for every retail investor. Millions of small investors reside in small towns far from cites. Moreover, maximum retail investors typical have day jobs.
