Maybe this post belongs to 'long/medium investing' section
Reading back page of AFR: Chanticleer section, dated Weekend 12-13 Apr. Five Criteria are listed:
1): Management Quality
2): Key Competitive Advantages
3): No Structural Deficiencies
4): Low Risk of Impairment
5): Good Continuity of Earnings
How does a beginner evaluate these five criteria.
1): Management: You either have to know someone who works in that company or know the person yourself. Do a google search and look at their online CVs?? Watch TV interviews and think WOW THIS GUY IS A GOOD BLOKE?? Would I believe CEO of QANTAS??? What is Management Quality?
Jackie Fairley, CEO of Starpharma gave a great interview last Thursday on ABC The Business Program. I did a google search on her and she has some amazing achievements. The only reason why I wouldn't invest is Staroharma makes a loss year in, year out. I a would not guess if their next set of trials will be successful or not in 4-6 months. Does this mean I need look at CVs of each CEO of each company I am watching?? Isn't a pretty face or a good bloke factor enough (Think Jodie Rich of One.Tel) HIH???????
2): Ability to beat competitors?? Different industries do easily or not easily provide that info. Coles vs Woolies, people just goto their nearest one. Both of them rip off suppliers and customers. I guess Analysis will give all of the answers. I cannot believe anyone can have a monopoly for long.
3): No structural deficiencies: what does this mean?? QANTAS not being foreign owned? Governments proposing changes to FBT for example, thus knocking down MMS shares last July?? Does this mean NAB being unable to sell off those poor UK businesses?? I don't understand this point
4): Low Risk of Impairment??? I really have no idea. If I was a Landlord of Twin Towers in New York. I thought that was a safe position until Sept 11, 2001. Am I on the right track?? Running a business that a Government decides to ban. Being the best candle making business on the eve of electric street lights???
5): Earnings: I am starting to read Half Yearly and Full Yearly reports. That only tells of past performances and we hope they will do better next time. This point was the easiest to understand.
It is a big ask to ask a beginner to understand and evaluate these 'simple' criteria.
Please help me, I am a beginner!!!!!!!