Hi Anant,
I am not sure if there is a sureshot way to know if management is acting in their interest or that of shareholders. (If there was, I’m sure no Enron would ever happen.)
What an aam investor can do is some due diligence and hope (or pray) that things won’t go south.
What I do with my investee companies (small caps) is to read quarterly concall transcripts and check quality of answers management provides to analysts’ questions. I also follow corporate actions (e.g. fund raise, preferential allotment), third party transactions, legal disputes, relevance/quality of investor announcement (and their timings) etc. If something seems odd or fishy, I either get out of stock or avoid it completely (if I’m not invested yet).
Others may debate this approach but I feel at peace knowing that I’m not stepping on a visible landmine.
There is no guarantee that I wouldn’t end with odd companies with hidden landmines and that’s the risk I will have no choice but to accept. As they say in stock market it’s important to not only have rules for what you want to buy but also have rules for what you will never buy.
Subscribe To Our Free Newsletter |