Finding Quality

So how can investors beat the market?

Photo: Jason DeFillippo. Source: Morguefile

There are lots of answers to that question. One approach is to find a stable of well-managed companies and stick with those. It’s harder than you think. For one thing, good management is hard to find. A great CEO can inspire people to deliver results that even they don’t think they can do; can to envision markets that don’t exist right now; and avoids professional and personal potholes that erode trust and poison the culture. These are hard to do, and they’re even harder when you’re a CEO with fiduciary responsibilities. The only person you can talk to about all your problems is your Priest or your dog.

There are some extraordinary leaders out there, a lot of mediocre ones, and a few really bad apples. It’s hard, from a distance, to identify who the superior managers are, to separate the wheat from the chaff. At Charter we look at corporate financial performance as well as manager compensation. When they treat the company as if it’s their personal piggy bank, that’s a bad sign. One investor has noted that the extravagance of a corporate office is inversely proportional management’s commitment to shareholders. Warren Buffett bought a stake in an insurance company when he saw that they had linoleum floors in their headquarters. “They’re cheaper to clean,” the CEO told him.

Great leaders can make potato chips or dumping trash exciting for those who work for them. Owning stocks based on management competence and financial performance is a solid, fundamental approach to adding value. It doesn’t require a lot of trading. And management isn’t as volatile as the market.

There are plenty of ways to add value. Finding a manager that you can grow with is a good way to do this.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:21:59+00:00 May 3rd, 2016|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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