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Value Investing in Growth Companies: How To Spot High Growth Businesses and Generate 40% to 400% Investment Returns by Rusmin Ang, Victor Chng

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Chapter 5

Management—The Second Piece of the Puzzle

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Management Forms the Cornerstone of a Business

The second piece of the jigsaw puzzle is management. By placing money in the stock market, we are indirectly hoping to leverage someone else’s talent to compound our wealth, with that person running the business effectively in our place. The future growth of a company is highly dependent on its management. They are the board of directors, including the chief executive officer (CEO), executive or nonexecutive and independent directors, as well as senior management teams at the division level.

Having a great business in place is a good start. Good businesses produce great results in the long run; this often comes from having a great management at the helm of a company. However, many investors wrongly assume that management will take great care of their shares just because they have generated solid profits in the past. Thus, they fully trust management’s capability and skip this assessment altogether. This is quite risky!

As shareholders, we view management as our working partner. As we are not in a position to run the business, we entrust the management to hire quality people to undertake the various operating functions and run the company on our behalf.

In general, a great business can normally be attributed to a great management in place. Some businesses, owing to lax management, ...

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