Management Evaluation - 11 Questions to Ask Yourself When Assessing Your Stock's Management
I admit that conducting a management evaluation is very difficult, as the quality of a company's management team
is not something that is easily quantifiable. However you must form an opinion about the quality of a company's
management in order to be able to judge and compare. My due diligence on management consists at
least of finding an answer to the following questions:
11 Management Evaluation Questions
Where to Find the Answer:
1. Are the founders of the company still part of the management team?
Most of the answers regarding the quality, capacity and experience of the
management team can be found by visiting the company's website. Depending
on the layout, on most websites you will often find detailed information about the company's
management team under the section "About us", "Company", "Corporate", "Management", "Management
Team" or "Officers and Directors".
2. How long has the current management been with the company?
7. Are they committed to the success of the company or do they hold multiple
8. How does the management compensation compare with others in the same industry?
To learn more about how you can determine if management compensation is reasonable compared to
similar companies, I recommend you to read the management compensation comparison page.
9. Does the management team own shares in the company? If so, since when, how many and
at what price?
To inform yourself about the insider stock ownership I refer you to the insider stock trading pages on UndervaluedEquity.com which you can read by
clicking the link provided. To find out how I assess management's stock ownership I refer you to the
note of the bottom of this page.
10. Have they bought or sold their shares recently?
11. Have the preset goals outlined in the Management’s Discussion and Analysis
(MD&A) been achieved?
If you would like to learn how you can determine if the preset goals outlined in the
MD&A have been achieved, I recommend you to read the management assessment page.
Ultimately, you are trying to answer two questions: What is the company trying to
achieve, and does the company have a management team in place that has the experience and the will to achieve this
Management Evaluation Tool for Canadian Listed Companies
The Canadian Securities Administrators (CSA) provide a very useful tool for your due diligence on a
company's management team: the disciplined persons list. You can access this list by clicking the
image link below.
The disciplined persons list reveals the names of all persons disciplined by the Alberta Securities
Commission since 2005, the Autorité des marchés financiers since 2007, the British Columbia Securities Commission
since 1987, the Bureau de décision et de révision since 2007, the Manitoba Securities Commission since 1999, the
New Brunswick Securities Commission since 1991, the Nova Scotia Securities Commission since 2002, the Ontario
Securities Commission since 1997, the Saskatchewan Financial Services Commission since 2005, the Quebec provincial
court since 2007, the Investment Industry Regulatory Organization of Canada (IIROC) since 2004 and the Mutual Fund
Dealers Association of Canada (MFDA) since 2004. The disciplined persons list also includes the name of persons
whose sanctions have now expired.
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Note: It is always good to see a substantial
stock ownership by management as their interest is than more aligned with the interests of the 'normal'
shareholders, like you and me. It is also important to find out when they bought these shares, and at what prices
to get an idea of their confidence in the long-term prospects of the company. Ideally, I like to see insiders own a
substantial insider stock ownership percentage. However, I do not like to invest in company's which are
controlled by the insiders as the insiders then have too much power and can do almost everything they please.
Therefore I have determined a maximum insider ownership percentage. Should management not have invested at all in the
company it will make me think twice before investing in it myself.
Note: When I conclude that certain members of
the company's management do not own any shares in a stock in which I do own shares, I will always vote against the
prolongation of their function at the annual shareholders meeting.
What Type of Content Can You Expect to Find on UndervaluedEquity.com
Today's News Related to the Global Energy and Mining Stocks.On
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How I Conduct My Stock's Due Diligence Investigation Process.If
you want to know what I learned while I was conducting my due diligence, I recommend you to read
all the chapters of the investigation process.
Are These the Best Stocks to Buy Today.In my stock watchlist you
find stocks who offer great potential, but at the time I analysed these stocks they didn't comply
with all my guidelines from my due diligence chapters.
Are These the Best Shares to Buy Now.As the year 2015 has just started, I
believe it's about time that I share my stock portfolio with you. Therefore, you will find my
updated stock portfolio on this page.
Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for
investors passionate about investing in undervalued stocks. ThroughUndervaluedEquity.com, he shares his
experience and knowledge and will soon reveal his personal stock portfolio.