12 Ways how the “Ideal Company” should be run
Introduction:
Some years ago I introduced a 27 point “beta version” of an investment check list. This check list contained a lot of quantitative aspects, such as P/E, P/B or other multiples as well as some qualitative aspects. I used this as a rough guideline for analyzing potential long-term holdings but I found out that the quantitative aspects in a check list are not very helpful, because it leads to discarding really well run companies at a very early stage.
On the qualitative side however some things were missing, especially how a company is run for me became more and more important over the past years.
I think this aspect is not well covered by many other investors as most concentrate (only) on the “what”:
- What moat does a company have ?
- What industry are they in ?
- What ROE/ROIC/EBIT Margin does the company generate ?
- At what EPS/EBIT/Book multiples does the stock trade ?
- What is the “Magic Formula” that generates Alpha without actually looking into the companies I invest
For me the “what” in many cases is actually only a secondary result of the “how”. Moats for instance are not created out of thin air.