Management Quality through Numbers
How to judge management quality before buying stocks
 
Moneylife SmartSavers Investor Club organised its fourth programme on 16th April with a session “How To Assess the Management Quality before Buying Stocks”. The session was conducted by Dr Vijay Malik (whom Prof Sanjay Bakshi calls ‘Dr Stock’ because he is a qualified physician who can check the health of stocks) shared his insights on how to figure out whether the management is pro-shareholder or not, by looking through the annual reports carefully. Dr Vijay Malik, a rigorous stock-picker and a popular blogger, who spoke in public for the first time, enlightened the audience with his quantitative methods that help decipher whether the management is trustworthy or not. 
 
Judging the management quality is one of the most critical decisions while buying a stock. It assumes great significance for retail investors, as they have absolutely no influence on the company’s management. “While it is common to come across statements like shareholders are part-owners, this is not exactly true,” pointed out Dr Malik. “Retail investors cannot act like part-owners. They have no say in the management. They are compelled to accept whatever decisions are taken by the management.” This is why we must be absolutely certain that the company whose stock we have picked is run by a management that has the best interests of shareholders in mind. While everybody knows that management quality is paramount, investors frequently overlook this aspect because they do not have the right tools for such analysis. In his presentation, lasting for almost one hour 45 minutes, Dr Malik showed the audience how to search the Internet, read annual reports and scan the filings made by companies with the stock exchanges, to judge the management quality.
 
The session started with Debashis Basu, director of Moneylife Smart Savers, giving a quick overview on how management quality cannot be decided simply on the basis of adverse news and events that may only have a short-term impact. He gave real-life examples of managements with questionable decisions turning out better performance and so-called good managements ending up with mediocre performance. Dr Vijay Malik, with a unique combination—MBBS, MBA, stock-picker and biker—also explained with real-life case studies how profits/cash-flows of a company could be diverted to the promoters and related parties, defrauding minority shareholders. Pointing out that “Equity investing is a faith in management,” Dr Vijay Malik emphasised throughout the presentation that investors should “run at the first sign of trouble.” 
 
The programme ended with a Q&A session between Dr Malik, Mr Basu and an audience of more than 150, moderated by Sucheta Dalal, director of Moneylife Smart Savers. Dr Malik patiently answered questions concerning pledging of shares, warrants, promoters’ holding and contingent liabilities. The video of the programme is available for Rs700. To get access, please write to [email protected]

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Insurance Denied
Denial of insurance claims is well known, but denial of insurance proposal, to prevent you from getting life, health or personal accident policy, is also a reality. Insurers may deny you a policy under the garb of their ‘right to underwrite’. Worse, you have to declare your prior rejection, postponement, premium-loading offer or modification to the policy offered. It puts you in a bind. In our Cover Story, Raj Pradhan highlights numerous real-life examples to help you know what you can expect during insurance purchase. He suggests some steps that you can take to improve your chances of getting a proposal accepted.
 
We have often read about senior citizens being sold toxic financial products. Retirees are unaware of the risks. R Balakrishnan, on page 26, writes about the mistakes retirees make and what they can do to avoid losing their life’s savings. Once the money is invested in the wrong financial products, consumers find it impossible to get back their hard-earned money. In the Crosshairs column, Sucheta highlights two such problems. Her first piece shows how PACL owners are doing fine in Australia while depositors struggle to get the attention of regulator and investigators. Then there are the holders of corporate fixed deposits. Even after Moneylife Foundation highlighted the plight of over 1,100 savers who are struggling to get back their deposits from companies such as Helios & Matheson, Elder Pharmaceuticals and Jaiprakash Associates, government officials are showing no urgency to tackle the issue.
 
The Securities & Exchange Board of India’s (SEBI’s) technical advisory committee (TAC) has now conclusively shown that the National Stock Exchange’s (NSE’s) systems allowed certain entities to make huge profits by giving them faster access. Last year, the NSE tried to silence us by filing a Rs100-crore defamation suit against Moneylife, when we published a whistleblower’s report on it. Sucheta, in Different Strokes, highlights TAC’s findings on the serious lapses on the part of the NSE and its recommendation that SEBI take immediate action. Will it? Or will it let the wrongdoers, inside and outside the NSE, get away?
 

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COMMENTS

sundararaman gopalakrishnan

7 months ago

Please keep up the good work to help the " aam aadmi" from the govenment agencies,bureaucrats that thrive on harassing ordinary folks!!

Disclose all overseas assets to banks: SC tells Mallya
New Delhi : The Supreme Court on Tuesday directed beleaguered liquor baron Vijay Mallya to disclose all the overseas assets held by him and his estranged wife and children to the banks which are seeking the recovery of more than Rs.9,000 crore in the principal and interest, loaned to his now-grounded Kingfisher Airlines.
 
The direction came after the court noted the unwillingness of Mallya to return to India and personally apper before it. 
 
The banks would act on the disclosures in accordance with law, the apex court bench of Justice Kurian Joseph and Justice Rohinton Fali Nariman said, directing the disclosure of the assets Mallya holds abroad. 
 
The court also directed the Bengaluru-based debts recovery tribunal to dispose of the matter pending before it expeditiously, possibly within two months.
 
The court recorded the statement of senior counsel C.A. Vaidyanathan that these assets held by Mallya, his estranged wife and children were not covered under the personal guarantee given by Mallya to the banks to return the loans that the consortium of 13 banks, headed by the State Bank of India (SBI), to his now-grounded Kingfisher Airlines.
 
The court also recorded a submission by Attorney General Mukul Rohatgi, reserving his right to refute the submission made on behalf of Mallya.
 
Mallya had submitted the details of the overseas assets held by him and his estranged wife and children in a sealed cover to the court.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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