Let’s go through a light-hearted mix-and-match activity to learn something today, please share your comment and answer via FB.
Suppose you went to meet the management of 3 companies, and they look like this:
The Context as follows:
A) Management shares that the economy is very treacherous, not easy to grow, and they put their employees through much hardship. Finally, together with the team, they managed to save on some expenses and increase some new business. All in all, they managed to grow revenue by a small amount and operating income by a slightly higher amount. They shared that the industry and economy will likely be equally challenging next year.
B) When asked abut their balance sheet strength, and whether their end consumers on the ground are still able to stomach the rising prices for their main business, the management puffed up their chest and replied triumphantly “Our balance sheet is very strong! Also, we command a strong market share in our country of operations, we are the price-setter, if not for us, the end consumers have no better choice!” Indeed, their revenue and profits have been increasing by double digits every single year for the past 5 years.
C) Management shares their grand plan to become the World Number One in their industry, and laid out the exact path how they will get there. This is coupled by much observed activities where the company keeps winning new customers, keep expanding their business into synergistic areas. Industry expert opinions were issued where they believe the company’s projects are sustainable and properly run. Management is highly influential.
Now, if you have to match A), B) and C) to the following share price results 1), 2) and 3), what would your answer be?
Please share your comment and answer via FB, if i see your comment i will PM you my answer via FB at the end of the day. We are all here to learn, and it’s better we learn here in the real world where it costs nothing, than in the practical world where it may costs hard earned money. 🙂 _/|\_
The best part is this – you may not even need to meet the management in person to get a glimpse of their character; in this era, all you need to do is some basic googling and reading up.
But it may require some experience-garnering to improve this skill.
And of course, coupling your initial research with actually meeting the management is even more potent.